Warning to Asia: Trump Fires Opening Salvo in Global Trade War

Donald Trump's January 22 decision to impose tariffs on washing macines and solar panel cells and modules could signal the start of tough times for Asian exporters.

"The challenges against Chinese as well as Asian exports have only started," said French bank Natixis in a report. "We expect a difficult year ahead for Asia-US trade relations."

The US plans to impose a 20% tariff on the first 1.2 million large residential washing machines imported to the US in the first year, and 50% above that number. The levy will be reduced to 16% and 40% in the third year.  

The tariff on solar panel cells and modules is set at 30% in the first year, declining to 15% by the fourth year. But 2.5 gigawatts of unassembled solar cells will be allowed to be imported tariff free each year, a measure meant to allow manufacturers to retain access to cheap components for assembly in the US.

Will China retaliate?

China and South Korea criticised the decision and suggested they might file complaints with the World Trade Organization. WTO rules allow a member to temporarily restrict imports of a product if its domestic industry is injured or threatened with injury from a surge in imports. The Trump administration says this is the case with washing machines and solar cells, and is studying whether safeguards are also needed in steel and aluminum.

China is the world's biggest exporter of solar panels and a major washing machine supplier, so its response is being closely watched. Its Ministry of Commerce said the country is strongly dissatisfied with the US action, which it warned will have a negative impact on global trade and the development of the US solar industry. 

The Chinese Communits Party newspaper Global Times once outlined the retaliatory measures China can take in the event of a trade war with the US. "A batch of Boeing orders will be replaced by Airbus," said an op-ed piece in late 2016. "US auto and iPhone sales in China will suffer a setback. China can also limit the number of of Chinese students studying in the US."

A difficult year for Asia

In a report, Natixis says "it is hard to argue that China -- as well as other Asian manufacturers -- will not be harmed by these measures." More than half of solar panels imported by the US come from Malaysia and South Korea. 

The WTO can take action, notes Natixis, but "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."

The European Union and India can also follow the US lead, warns the bank. The EU brought a case against Chinese solar panels in the WTO in 2013.     

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