Trump’s trade war knocking at 2018’s door

President Trump has approved recommendations to impose safeguard tariffs on imported residential washing machines and solar panel cells and modules. These measures should not come at a surprise as the US administration has officially opposes China’s bid for recognition as “market economy” in the World Trade Organization right after Trump’s visit to China.

Several takeaways can be delivered from the news.

•  The announced tariffs only focus on two products. The unbiased attitude with no targeted country, at least on paper, seems to suggest that the US is willing to defend domestic industries no matter where the source of threat may originate. Nevertheless, China is a natural target given its large market share for most exports and, certainly white goods and solar panels.
• The sum of solar panels and washing machines only accounts for a small proportion of Chinese exports, but it is hard to argue that China – as well as other Asian manufacturing exporters – will not be harmed by these measures. One way out, at least on paper, would be for the WTO to respond to the US proposal. Still, the threat of the US abandoning the WTO does not put the institution in a very comfortable position to address concerns from China or other Asian producers.
• Beyond the potential extension of US tariffs to other import goods, a soft response – or silence from the WTO – could open the door to other major economies following the US in their quest for a “supposedly’ fairer trade relation with China and other Asian countries.

In a nutshell, the challenges against Chinese as well as Asian exports have only started, with the beginning of the year. If the US action is acquiesced or even agreed, more hurdles are expected to come. All in all, we expect a difficult year ahead for Asia-US trade relations.

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