Real danger of US-China trade war lies in Taiwan

There is no end in sight to the trade war between the US and China. ‘This could last for decades,’ sighed one official as the US began taxing $200 billion in imports from China.

This has taken the dispute to a whole new level. Not only is the amount of goods subject to tariffs four times larger than in the first round, President Trump has also threatened to slap punitive taxes on everything China exports to the US if Beijing retaliates.

Donald Trump stuck closely to his ‘America First’ message as he defended the trade war to the United Nations. He warned that the US ‘will no longer allow our workers to be victimised, our companies to be cheated, and our wealth to be plundered and transferred’.

Officially, China is now America’s ‘strategic competitor’. But in Mr Trump’s rhetoric, it is being presented as an adversary and rule-breaker, just at a time when it is trying to present itself on the world stage as a responsible leader.

The sense that the Chinese are now America’s adversaries has spilled over into the press. State media outlets such as Xinhua have been obliged to register as ‘foreign agents’ when they work in the United States.

In response, the Chinese media has stopped playing down the story of the trade war, which doesn’t fit well with their usual narrative of China as a friendly, cooperative country. The Global Times warned that ‘China is a big and powerful nation, so whether it is a confrontation with China economically or militarily, it would come at a huge price’.

Meanwhile China Daily noted: ‘That the issue is increasingly moving beyond trade is the real cause of concern and that is where the real danger lies.’

One potential flashpoint is the status of Taiwan, which the Pentagon has praised as ‘an important force for political stability, military balance, and economic progress in the region’.The US approved a $330 million arms sale to Taiwan last month, just as it slapped further tariffs on goods imported from mainland China. The government has also made it easier for US businesses to trade with Taiwan and much harder to trade with China.

This riles Xi Jinping’s administration, which contends that Taiwan is part of Chinese territory under its ‘One China’ policy. It also acts as a potential setback to China’s grandiose plans to become the world’s leader in technology by 2025. That goal will be difficult to achieve without cooperation from the United States and support from technologically-advanced Taiwan.

Adding Taiwan to the agenda will also add another layer of complexity to talks aimed at resolving the US-China trade dispute.

China is reluctant to give up what it sees as its sovereign rights, including its territorial claim upon Taiwan. But in order to de-escalate the dispute, it will have to make concessions.

Past Chinese administrations would probably have found ways to make discreet compromises but President Xi is not one to relinquish ground easily. That means the tension is likely to rise. Unfortunately, with Taiwan stuck in the middle, it significantly raises the level of danger for Asia.

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