Trump’s China ploy is a foolish gamble

Donald Trump’s threat to impose a further 50 per cent tariff on Chinese imports has taken the trade war triggered by the US president into potentially dangerous geo-political waters. Beijing’s decision to match the 34 per cent tax on its exports has prompted a furious response from Washington, which sees its efforts to create a level playing field thwarted.

Unless China backs down, Mr Trump has said he will levy an additional tariff from Wednesday, taking the charge on imports to more than 100 per cent. If this is matched by Beijing, trade between the two countries would be stymied.

For US tech companies still reliant on parts from China this could be a serious blow. Computing and electronics giants like Apple, Intel and Qualcomm, as well as Elon Musk’s Tesla car maker, need China for a huge part of their businesses.

The scene is now set for the showdown that has been on the cards since President Trump first entered the White House in 2017, consumed by hostility towards China’s perceived unfair trade advantage.

The prospect of a clash then was mitigated by a summit meeting with Xi Jinping and there had been talk of another meeting between the two leaders. But the peremptory imposition of tariffs by Mr Trump is seen in Beijing as a breach of an agreement to have a 100-day “cooling-off” period.

China is now threatening to fight “to the end” and its history has made it resistant to pressure from Western powers. No one knows whether Mr Trump is serious or just angling for a deal with Beijing. His forecast that one “will happen” sent stock markets back up again after they had crashed the previous day. “We’re awaiting their call,” he said.

It is this uncertainty about the president’s intentions that is causing such volatility. An all-out trade war between the world’s two biggest economies will spook the markets further.

The world is watching to see who will blink first with neither side wishing to lose face or appear weak. Moreover, China has powerful weapons: it holds huge amounts of US debt and claims sovereignty over Taiwan, which holds a dominant position in the global semiconductor industry. It is not inconceivable that Beijing will consider a move against the island to deny these critical components to the US.

For good or ill, President Trump is attempting to force China to bend to his demands, with no real idea of where this will end up.