Even though Donald Trump has not yet taken office, the USA and Chins are getting ready for a trade war. China’s reaction seems to have come because Mr Trump has been threatening to slap tariffs on Chinese imports, which he has doubled down on by his threat to BRICS nations to impose tariffs on them if they tried to develop an alternative joint currency to replace the dollar as the world’s reserve currency. Publicly, Chinese leaders have said that a trade war would suit no one, but they have been preparing for such a clash. Of course, such a clash will not help the world. If China has become the ‘workshop of the world’, the USA is its largest customer. Mr Trump has a choice: engage in full-fledged trade war, or back off, and just take token steps to satisfy his base. China exports to the USA because its consumers find Chinese manufactures good enough and cheap enough to buy. If US manufacturers produced goods cheaper and better than Chinese, they would sell.
The last time, as President, Mr Trump ended the trade war when China agreed to buy more soybeans to serve as cattle feed. This time, one of the cards China looks likely to play is to buy more US oil and LNG. Trade in hydrocarbons is bad for the environment, but Mr Trump is one of the climate change deniers. However, he might want to rethink a strategy which involves selling more primary products. Chinese manufacturers want to have access to technologically sophisticated products, such as computer chips. It is not as if China is worse at producing commodities than the USA. However, Mr Trump should realize that China is already ahead in such key fields of the future, such as green energy and electric vehicles, and an exchange would be fruitful. He must also avoid driving China to seek advanced technology from Europe, as it has bfgun to do.
Pakistan must tread carefully. While it is hardly an economic powerhouse, its economic ties to China are greater than the USA. Unfortunately, Pakistan’s decision-makers tend to think in purely geopolitical terms, and make decisions accordingly.Pakistan must think in this case with its pocketbook, and keep a weather eye open for how the USA will bring India into play against China on the economic front. In his last term, Trump din’t make nice to India for nothing.
