SINGAPORE (July 9): The US is likely to go ahead with tariffs on US$34 billion ($46.4 billion) worth of Chinese exports on July 6, with a further US$16 billion worth of Chinese exports at risk once public hearings are completed. China has made it clear that it will retaliate in kind, which prompted US President Donald Trump to vow even heftier tariffs in return. Canada has already imposed tariffs against US exports in retaliation for US tariffs on steel and aluminium. The European Commission has told the US Commerce Department in no uncertain terms that if the US persists with planned tariffs on European Union cars and auto parts, the EU would enact counter-measures that would hit a broad swathe of US exports to the EU.

So, trade tensions are escalating into trade skirmishes. These may end up in a full-blown trade war if misjudgements are made by leaders such as Trump or Chinese President Xi Jinping. If the issues were purely about trade, this risk would be low. But, trade is highly politicised and, certainly as far as the US and China go, the issues extend beyond the economic domain into big power struggles for strategic advantage. That makes a straightforward resolution of trade squabbles harder to achieve, but not impossible.

US-China strategic rivalry is set to worsen, complicating the trade issue

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