On Tuesday, the Trump administration proposed levying 25 percent tariffs on 1,300 Chinese goods in aviation, technology and machinery sectors, which would add up to about $50 billion annually. In retaliation, China on Wednesday announced plans to impose its own 25 percent tariff on $50 billion worth of US exports including aircraft, cars and soybeans.
Earlier, China imposed levies on $3 billion worth of US fruits, nuts, pork and wine to protest the Trump administration’s move to impose tariffs on steel and aluminum imported from China last month.
The ramped-up trade dispute comes only weeks before US President Donald Trump is set to have a summit with North Korean leader Kim Jong-un before the end of May, which is expected to shape the fate of the Korean Peninsula.
As conflicts over bilateral trade escalate, the world’s largest economies might be tempted to use the North Korea issue to win leverage over each other, experts say.
“Conflicts on the trade front between the US and China could have a negative impact on resolving North Korea’s nuclear issue, as it could lead them to be less willing to cooperate on the security front,” said Kang Jun-young, a professor at Hankuk University of Foreign Studies.
“China could use the North Korea card during negotiations with the US, as the relations between China and the North have apparently improved,” he said. “The North Korean leader is aware of it, so he appears to be taking advantage of the competition between the US and China.”
Both the US, South Korea’s closest ally, and China, North Korea’s traditional ally, are committed to the complete, verifiable, and irreversible denuclearization of the Korean Peninsula, but they have differing positions on how to achieve the goal.
The US calls for the North to dismantle its nuclear weapons programs before any incentives such as the lifting of sanctions are considered. China, on the other hand, backs the North’s denuclearization in phases.
While South Korea remains committed to the US-led “maximum pressure” campaign against the North and complete denuclearization of the isolated country, South Korea appears to side with China in pursuing “action-for-action” phased approach for denuclearization.
China’s assistance is essential in denuclearizing the North. China is the North’s major source of hard currency, oil and aids and the biggest trading partner, accounting for more than 90 percent of trade with the isolated country.
China also has proved itself to be still a major player in matters regarding the Korean Peninsula after North Korean leader Kim met Chinese President Xi Jinping in Beijing. Their meeting dismissed China’s concerns that it is losing influence over North Korea and increasingly being sidelined in negotiations between the Koreas and the US over the North’s nuclear weapons programs.
But as for the ongoing trade dispute, the stakes are high for both the US and China, as the result of a potential trade war has massive ramifications for both Trump and Xi domestically.
Trump is facing mid-term elections in November, while Xi has just begun his second term as president with an option to rule for life and probably wants to expand his clout abroad.
“To rise as a global power, Xi tightened his grip domestically. Now, he is under pressure not to lose in the competition with the US. He can rally the Chinese people behind his leadership by fighting back against the US,” Kang said.
But even if ongoing trade skirmishes lead to an all-out trade war between the US and China, the broad agreement to hold dialogue with the North to tackle the nuclear standoff will stay valid, as denuclearization of North Korea is in both the US and China’s interests, he said.
President Trump downplayed concerns over a trade war with China, but made it clear he will not back down.
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US,” he wrote on Twitter. “Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”
In Trump’s mind, his “America First” policy means that he puts the revival of the US economy first before anything else. He could use the North Korea issue in his negotiations with China to extract better terms on trade, said Park Won-gon, a professor at Handong Global University.
“There is a possibility that Trump will use the North Korea card to put pressure on China to resolve the North Korean nuclear issue,” he said. “It is his typical style to push the other side into a corner to maximize his bargaining power.”
And South Korea could be stuck in the middle.
Trump’s tying of trade issues with North Korea was a warning to South Korea that it should closely coordinate with the US and stay on the same page in achieving North Korea’s denuclearization, said Kim Hyun-wook, a professor at the Korea National Diplomatic Academy.
Trump said that he may hold up the free trade deal with South Korea until after an agreement is reached with North Korea over its nuclear weapons programs.
During a speech in Richfield, Ohio, he said that the revamped bilateral trade deal is “a very strong card and I want to make sure everyone is treated fairly,“ linking the trade deal with progress in denuclearizing North Korea.
The US and South Korean trade representatives have agreed US steel tariffs would not apply to South Korean firms and that South Korea would lift restrictions on US automobiles.
“South Korea should maintain a strong alliance and coordination with the US to make sure the US stays in the game without being alienated,” he said, adding that Trump does not necessarily separate security from trade and choose what works in favor of him.
But it also could be an opportunity for South Korea, he pointed out.
“When the US and China are too cooperative, it is difficult for South Korea to take a lead. I think the ongoing conflicts could be a chance for South Korea to play a mediating role between the countries to achieve the goal of the North’s denuclearization,” he said.