How Trump's Trade Deals Take Aim at China

To appease the world's biggest market, countries must anger the world's biggest trader.

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In the first cold war between America and the Soviet Union, the two superpowers fought each other by proxy. Something similar is happening in America's trade war with China. After conciliatory talks in Geneva and London, the two sides are no longer bashing each other with new tariffs. Instead, America is waging its war indirectly, through unfortunate third countries.

Its new deal with Vietnam and its fresh tariff threats issued to many other countries seem designed to reduce China's role in their supply chain. Countries that had hoped to stay out of the new cold war now fear they are being forced to pick a side. To appease the world's biggest market, they must anger the world's biggest trader.

On July 7, US President Donald Trump sent letters to Japan, South Korea and a dozen other trading partners pushing back the deadline for their trade talks from July 9 to Aug 1 and tweaking the tariffs they will face if talks fail.

Japan and South Korea, for example, will incur tariffs of 25 per cent. Cambodia will be clobbered with tariffs of 36 per cent; Myanmar and Laos face 40 per cent. The letters also said that any goods "transshipped" from elsewhere would face the higher tariffs they were seeking to avoid. Although China was not named, no one was in any doubt about the elsewhere Mr Trump had in mind.

The US President also threatened to place an extra 10 per cent tariff on countries aligning themselves with the "anti-American policies" of the Brics group, established in 2009 by China alongside Brazil, Russia, India and later South Africa. He has previously warned it not to try to dethrone the dollar as the world's dominant currency.