No silk to steel ploy by Trump

Editorial | Mary Ma 5 Mar 2018

After solar panels and washing machines, Donald Trump now says he's going to hit steel and aluminium imports hard. If he means business, we should know more about it this week.

The US president's tweet was curious - not naming any country - although it's generally thought to be aimed at China, which produces a lot of steel and aluminium. The message not only surprised the United States' long-time allies, but reportedly also astounded his aides in the White House.

It's a truly weird administration.

China has learned how to roll with the punches after having been targeted by US administrations in the past. Beijing's reaction to the steel and aluminium threats have been rather restrained, with good reason, since the mainland only exports a tiny fraction of the materials - 0.1 percent of its steel production, for example - to America.

So even if Trump presses ahead with the new trade tariffs this week, the impact on the Middle Kingdom would be inconsequential, as long as the taxes are confined to raw materials, and not finished products made of steel or aluminium.

Then, why is he embarking down the pathway to the "hell of a problem" - to use Republic National Committee ex-chairman Michael Steele's words?

Some dismissed it as a "kneejerk reaction" born out of anger after a tumultuous week at the White House, which saw the departure of one of his key confidantes, Hope Hicks, and a spat with his normally obedient attorney-general, Jeff Sessions.

Can that analysis be credible? Even if it was true, it would still be too big of a kneejerk reflex. Rather, Trump may be paving way for his re-election three years from now. He has a dream - a day dream - of following his Chinese counterpart Xi Jinping's example in amending the constitution to allow himself to remain in power for more than two terms, or even life.

After the success of US tax cuts in his first year in office, Trump needs to unleash another big salvo to propel his second year. Is there something easier to win than a trade war? While he's wrong to think so, nevertheless he's convinced he can win a trade war and show the results to his diehard nationalistic supporters.

Or he's acting out of his personal conviction in protectionism, even at the expense of close allies like Canada and Europe which, unlike China, will be hit hard by Trump tariffs on imports of raw steel and aluminium. Canada, for instance, depends hugely on the United States for exports.

At best, it's merely a scare tactic to intimidate trading partners.

It's dangerous in all the scenarios. The European Union has been reacting strongly since Trump's alarming tweet, setting off a new round of war of words, with the American commander-in-chief warning about taxing European cars.

Will the heated rhetoric give birth to a black swan for the global economy? Trump is playing with fire.

If he started with the aim to scare, rather than of initiating a trade war, things can get out of control easily. If it's meant to be real, the world economy is bound to suffer a severe blow, and nobody will emerge a winner.

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