With a minimum of fuss and fanfare, the Chinese have struck back at the US, so far only aiming light blows but promising harder ones soon. American pork will be costlier when it reaches Chinese dining tables and recycled aluminium will also be more expensive. Coming up soon could be further tariffs on a list of 128 items including soybean and fruits and nuts. The Chinese import around 57 per cent of America’s soybean crop, worth more than $10 billion, so such a move would be a blow to the solar plexus. The Chinese have also made it clear that the already announced tariffs are only in reply to America’s initial tariffs on steel and aluminium and that if President Donald Trump goes ahead with his threatened 25 per cent levies on $60-billion worth of Chinese imports they will strike back equally hard.

The Chinese are deliberately going for the American farmers in the first instalment of tariffs partly because Trump’s supporters come from the American heartland and also because farmers’ lobbies are powerful. The Chinese have also indicated that if matters get worse, they may switch from Boeing and buy Airbuses instead.

The Chinese are as puzzled as the rest of the world about how to deal with Trump who’s unpredictable and delights in doing exactly the opposite of what everyone expects. He insists that the US can win a trade war because it is the world’s biggest market and other countries can’t do without it. But the Chinese have subtly signalled that they shouldn’t be forced to opt for the nuclear option and stop buying US Treasury bonds. The Chinese hold over $1 trillion worth of these bonds. If the Chinese stop mopping them up that would have huge repercussions for the US economy but it would also hurt the Chinese.

India needs to watch out for the opportunities that can sometimes be thrown up by trade wars and ensure that it doesn’t suffer collateral damage.

Paran Balakrishnan Editorial Consultant

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