A potentially disastrous trade conflict between the US and China is coming to the boil this week as a series of inflammatory documents are delivered to the White House and President Donald Trump prepares to impose sanctions.
Twin inquiries by the US Commerce Department could open the way for punitive measures against Chinese steel and aluminium shipments on national security grounds, while a highly-sensitive probe into intellectual property theft and cyber-espionage will deliver its findings on Thursday.
Mr Trump met his ultra-hawkish trade strategist, Robert Lighthizer, in Florida over the weekend to finalise plans, with the North American Free Trade Agreement (Nafta) also in jeopardy.
Global assets markets have largely discounted the threat of a serious clash between the world’s two economic superpowers, instead celebrating the cyclical recovery of world shipping and deeming Mr Trump’s bark worse than his bite. They may have misread the political runes in Washington, underestimating lag-times as the complex machinery of the US government slowly shifts direction like a turning supertanker.
Mr Lighthizer spelt out the new strategy in stark terms recently, accusing Beijing of predatory behaviour and abusive subsidies to capture global market share. “The sheer scale of their coordinated efforts to create national champions, to force technology transfer, and to distort markets in China and throughout the world is a threat to the world trading system that is unprecedented,” he said.
“Years of talking about these problems has not worked. So, expect change, and expect action,” he said, warning that the White House would use “every instrument” available for a counter-attack. The danger is that this could backfire horribly since the Chinese leadership are in no mood to heed lectures and believe they have ample means to retaliate.
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