2 weeks Ago
TRUE to form, the first half of Trump 2.0 reflects the second half of Trump 1.0 – spiralling tariffs amounting to a trade war.
The difference is that the 2018-2020 tariffs were directed against China, while the “reciprocal” (as Trump calls them) tariffs from next Wednesday are directed against the rest of the world. As various countries plot retaliation, it has become multiple trade wars. With tariffs on US neighbours Canada and Mexico, then European Union countries, and then other US allies, friends, and partners, Trump declared tariffs are being taken “to a whole new level”.
The implications go beyond trade, as does the prospect of backfiring. The White House calls them “reciprocal tariffs”, except that they are not. Japan imposes no tariffs on American cars entering the Japanese market, but the US is imposing 25% tariffs on Japanese car imports.
Other “friendly” countries hit include Britain and Australia which make up the trilateral security partnership Aukus with the US, as well as India which forms the Quad (Quadrilateral Security Dialogue) with Japan, Australia and the US. Initially said to target the dozen or so countries with which the US has major trade deficits, the tariffs now target more than 180 countries and territories worldwide. The scope for blowback is vast and the opportunities plentiful.
The larger implications include dilution of a US-China trade war now made globally multilateral, with a solid boost for growing multipolarity. US friends and allies are treated no differently from rivals and adversaries. In 2013 China displaced the US to become the world’s largest trading nation.
In the same year the World Bank declared China’s economy the world’s biggest in PPP (purchasing power parity) terms. Sweeping US tariffs signify a swing towards isolationism, a process of losing credit and credibility with other trading nations. Each US loss is China’s likely gain.
While China is boosting external trade through port construction, the US is weaponising port facilities and portraying China as a military threat. Such efforts tend to have limited credulity even after stretching it. With South America alone, China has multiplied trade 40-fold in four decades.
Peru’s new China-funded deepwater mega-port of Chancay will embed this trend. A lack of competitiveness in global trade cannot be resolved with ever-rising tariffs. The cost to global GDP is projected at US$700bil (RM1.
62 trillion), with the US being hardest hit overall through higher risks of inflation, the looming prospect of recession, and an additional cost of RM5,000 per household for pricier imports. Britain openly agrees with China that trade wars have no winners. The EU is taking a more positive look at China trade, while other US allies Japan and South Korea agree with China on building closer cooperation.
In Singapore, the Institute of South-East Asian Studies (Yusof Ishak Institute) annual survey this year found the region more in favour with Trump 2.0 than last year’s survey. But these latest survey findings concluded in mid- February, two whole weeks before Trump’s tariffs announcement on April 2.
This Trump “bounce” compares Trump 2.0 favourably with Biden’s increasingly fraught relationship with China, just as Biden’s bounce in the initial months of 2021 compared favourably with Trump 1.0’s tariffs.
Both sets of positive expectations have been dashed. In 1984 the Reagan administration withdrew the US from Unesco (United Nations Educa-tional, Scientific and Cultural Organisation) citing Soviet influence during the Cold War, when it was actually the rise of Global South countries in multilateral institutions like Unesco. The US later rejoined owing to perceptions of China’s growing influence in its absence.
There are still some calls in Trump 2.0 for the US to withdraw from Unesco again. However, the same reason for rejoining still applies.
In 1987, Reagan imposed 100% tariffs on Japanese semiconductors over a trade dispute involving a range of household electrical appliances from Japan. None-theless, Reagan was clear that tariffs could not be anything more than a temporary measure with limited scope. Is Trump now abandoning his reputation as a Reaganite? The whole unreality of worldwide sanctions, even for a global trading nation on the retreat, suggests they are just a bargaining tactic for a transactional Trump.
Predictably, his senior aides insist the tariffs are serious and not a bargaining tactic, because that was what he told them to say. But Trump then told reporters that the tariffs are a bargaining tactic. Old habits die hard.
Even the 2018 trade war on China was never meant to last, as former National Security Adviser John Bolton has revealed. The larger problem for Trump is not only that other countries are selling more to the US than the US is buying from them, it’s also that US consumers are also becoming less able to buy, and higher tariffs would seal their fate – for as long as they last. Bunn Nagara is Director and Senior Fellow of the BRI Caucus for Asia-Pacific, and Honorary Fellow of the Perak Academy.
The views expressed here are solely the writer’s own..
