Has Trump Bitten More Than He Could Chew?

While Trump’s trade war on China and Europe sounds full of fire and fury, experts believe that he might be in for some nasty surprises, Says Saurabh Kumar Shahi

Since the last few weeks, the trade war between the United States and China as well as between the United States and European Union has further escalated. Trump was clearly waiting for North Korea summit to finish before opening another salvo on China. However, nothing suggests that China was caught napping. In fact, sources inside China maintain that this trade war was inevitable and that China was waiting for it for a very long time.
On Monday, June 18, Trump administration started drafting agenda for tariffs on a further $200bn in Chinese imports if China delivers on its threat to retaliate against US duties on imports that were put last week. In the tariffs that were announced last week, which will start to come into effect from July 1, products worth $100bn are involved.This is apart from the tariffs that the US imposed on steel and aluminium and China retaliated by imposing some on agricultural goods.
China is deliberately targeting those Republican States that are going for polls in November this year. Since Republican base is primarily rural and agrarian, the tariffs are targeted towards the same population. In the Chinese tariff on $50bn worth of goods, the focus is on soybean, whiskey, beef, premium motor-cycle and Off-road vehicles: all of which come from Republican-ruled states mostly. This has already started to bite the Republican base. And nowhere is this more evident than in the retaliation planned by the conservative Koch Family.
US billionaire brothers Charles and David Koch have made a decision to fund a multi-million dollar campaign against Trump’s trade tariffs. As many as three political lobbiessupported by the family will soon start using advertising, lobbying and door-to-door campaigns targeting Trump’s decision. Koch Family funds several Republican bigwigs including Vice President Mike Pence. This is going to hurt, and how.
However, China is not the only headache the US is facing. Some targeted, concerted actions from other quarters have also started to come into effect. The fresh volley has come from Moscow.  The US Treasury Department report for April which was released on June 15 has declared that Russia sold $47.4 billion out of the $96.1 it had kept in the US Treasury bonds. Sources close to this correspondent maintain that a renewed synergy is developing between Beijing and Moscow and this latest move from Russia should be seen in this perspective only.
Worse, other countries, including some of US’ strategic allies, have also started selling bonds. This when interest rates are high and expected to rise further. The report further suggests that Japan sold off about $12 billion, China liquidated roughly $7 billion while Ireland ditched over $17 billion worth of it during the same period.
“The foreign demand is critical to offset an expected surge in federal borrowing needs. The Treasury Department needs to finance the huge spending bill along with tax cuts that were passed by Congress in December 2017. It plans to auction off around $1.4 trillion in treasuries this year with a glut of sellers and a shortage of buyers in the bond market the government plans to add $600 billion to,” says noted analyst ArkadySavitsky, noted foreign affairs expert with Strategic Culture Org.
The reports are hardly encouraging from the European front where an unexpected development will put further pressure on Trump administration. Celebrated financial expert Neal Kimberley has now predicted that “the moves by the European Central Bank and Federal Reserve may result in a weaker euro against the dollar, affecting the price of US exports and imports, and undermining the president’s aggressive trade moves.”
The trade war has also started to draw comments from big American Corporations, someone Trump simply cannot afford to repel in the election year. Auto major Daimler has already said that tariffs have started to affect its bottom line, leading to the freefall of auto stocks. Other industry giants are biding time and might come out with their own pessimistic opinion in the days and weeks to come.