Donald Trump is reportedly set to make good on one of the most consequential threats of his presidency. We expect the US president will announce later today that he’s decided to move forward with a 25 percent tariff on $50 billion of Chinese products. This is the first true shot fired in a potential trade war that might pit the world’s largest economy against the second largest. China will no doubt react quickly and forcefully to enact trade measures that it has so far held in reserve.
The greatest risk here is not that China will make trouble for Trump’s bid to engage North Korea’s Kim Jong-un. That’s not in China’s interest. Nor is there much greater risk of confrontation in the South China Sea. The real worry is that Trump and China’s Xi Jinping will continue to ramp up pressure on one another because each believes the other is more vulnerable to a trade war and neither wants to lose face by backing down.
This is just the beginning of a story we’ll continue to watch closely.