Despite his expressed admiration for Presidents Putin and Xi Jinping, President Trump now simultaneously confronts both Russia and China, though on different issues. How far might these confrontations go, and with what consequences?
In addition to the US-led existing economic sanctions on Russia, arising from the covert aggression against Ukraine and annexation of Crimea, the White House has now announced sanctions on 17 top Russian officials, seven billionaire oligarchs, and 14 companies.
Their assets abroad are frozen and they cannot trade in US dollars. US citizens are banned from doing business with them. So also -- for the first time -- are non-Americans who facilitate significant transactions.
The sanctions target the power elite around Putin, but are likely to have a much wider impact, particularly on foreign investment and Russia’s commodities trade, hitting an economy only recently recovering from recession. Oil and gas exports can continue but the ruble and Russian stocks have fallen sharply.
Shares in Rusal, a major Russian aluminium producer and exporter, even fell 55%, reflecting loss of its US and EU markets. China cannot help, as it has its own surplus of aluminium. Rusal already carried considerable debt and the Russian state may have to give expensive support to keep it in business.
These latest US sanctions go far beyond a reaction to the Skripal poisoning case in the UK.
They are expressly linked to the whole range of Russia’s cyber warfare and other actions against the West.
They come as Russia and the US are perilously close to a direct clash in Syria, as Trump threatens imminent missile attacks on Assad’s forces in answer to their use of banned chemical weapons, and tweets defiantly in response to Russia’s warnings of serious consequences and retaliation.
The appointments of hardliners Pompeo and Bolton to key positions in the White House team only add to the tension.
The potential for accidental direct conflict, adding to the regional threats and disorder in the Middle East, particularly the Houthi missile attacks on Riyadh, has already led to a rise in global oil prices.
New supporters of free trade
As if this is not enough, the world also has to worry about a possible escalation from threatened mutual tariff rises by the US and China towards a full scale trade war. The head of the IMF has warned that a trade war between the two biggest global economies could tear apart the multilateral trade system and represent “an inexcusable collective policy failure.”
So far, markets are reacting calmly but with fingers crossed, betting that the worst will not happen.
President Trump’s threats to escalate tariffs on a huge range of Chinese exports to America, to cut them by $50 billion or even $100 billion, have not yet entered into force.
They have met with a strong domestic reaction from economists and business interests, who not only challenge Trump’s obsession with bi-lateral trade deficits, but point to the damage that would be done to US consumers and to US manufacturing supply chains.
These promises address many of the long standing American complaints against China, and so could strengthen Trump critics
The Chinese have responded to each higher threat with measured reciprocation, targeted particularly at Trump supporter base agricultural areas, such as soya bean exports.
Xi Jinping has also made a major speech promising to further open up the Chinese economy, lowering tariffs on foreign vehicles, allowing majority share holding by foreign financial and insurance firms, and strengthening protection of intellectual property.
These promises address many of the main features of long standing American complaints against China, and so could strengthen Trump critics. They also directly position Xi and China as the new main supporters of free trade under WTO supervision, as against any wide reversion to national protectionism.
A multi-polar world
However, with the exception of the pledge to reduce vehicle tariffs “this year,” they set out no timeline for implementation and so remain just promises -- promises that have been made before. The EU has sourly spoken of “promise fatigue.”
There is little doubt that the promises do indeed reflect the direction of Chinese policy as its economy moves away from export dependency and towards focus on its own domestic consumer market and services.
In many areas, it has already reached parity with developed countries in technological and scientific development.
But will such promises by themselves be enough to enable Trump to claim a success, achieved purely by his threats of escalation?
Just as the tension heightened by US sanctions on Russia is increased further by the danger of a military clash in Syria, that of a US/China widening trade war is accompanied by a similar power tension between these two giants, especially in the South China Sea.
At least there, the build-up has been gradual and measured on both sides, with no imminent threat of missiles attacks. But as US and allied warships assert rights of passage in international waters, such a dire possibility cannot be excluded.
We live in an increasingly multi-polar world in which the post-WWII international order of nation states and the UN Charter seems strained to breaking point by rising new powers, including financial entities equivalent to major states, and by Trump’s erratic abandonment of the US’ collective leadership.
Yet, at the same time, the world faces other rapidly growing collective challenges -- climate change (which Trump denies), population explosions in areas lacking contraception, education and health services, youth joblessness combined with new aspirations born of the information explosion, and breeding despair and violence.
Christine Lagarde, the IMF chief, points also to the alarming global rise of 40% in public and private debt, to $164 trillion, since 2007.
Our world has made tremendous progress in many ways since WWII, and has the technology and knowledge to continue that progress. Yet such progress is not inevitable. The world, all of us, must try harder.
Selina Mohsin is a former ambassador.
