As the Communist Party makes him leader for life, Chinese President Xi Jinping is now a bigger question mark than America’s tweeter-in-chief

“Stupid.” That was Li Xinchuang’s description of Donald Trump’s recent assault on free trade, and it’s hard to disagree with the China Iron and Steel Association executive.

Were Xi Jinping a Twitter user, the Chinese President might have his own saucy take on Trump’s 25% tariffs on steel, 10% levies on aluminium and vague threats of more to come. But, as the Communist Party makes him leader for life, Xi is now a bigger question mark than America’s tweeter-in-chief.

Trump has proven stunningly transparent. Not his personal finances and political scams, but what he’s thinking. Whereas Americans used to wait months or years to learn what past leaders thought, Trump tells all in real time.

Love it or hate it, @realDonaldTrump displays how Trump’s “id”, in the Sigmund Freud sense, routinely defeats his “superego”. If “id” is one’s inner infant with all the base appetites and tantrums, “superego” is the parental authority trying to keep us in line.

It follows that, for now, Trump is the global trading system’s “id” to Xi’s “superego”. But the real question is how Xi, whose authority keeps expanding, might respond to Trump’s outbursts. In other words, might the punishment be far more draconian and impactful than Trump appreciates?

Transparent Trump is doing exactly what he promised supporters on the campaign trail. He pledged to take on a Chinese government he claimed was “raping” and “killing” American workers. Trump makes no secret he’s miffed that Xi hasn’t curbed North Korea’s exploits. He’s desperate to change the narrative away from the Russia and corruption scandals swirling around his White House. How better than launching a trade war?

Trouble is, Trump hasn’t considered the consequences. “The real problems,” says Arthur Kroeber of Gavekal Dragonomics, “are second-order effects, relating to the systemic impact of the US thumbing its nose at the global trading system it worked so hard to build. The basic question, impossible to answer at the moment, is whether this move is a one-off, driven by Trump’s visceral desire to impose big tariffs on someone?”

While Xi’s China is the target, Washington’s tariffs will hit Brazil, Canada, European Union, Japan, Mexico, South Korea and Taiwan—all, in theory, US allies. And for what? China exports just a small fraction of steel and aluminium output to Trumpland. As such, Kroeber says, Trump’s tariffs “make it far harder to organize resistance to Chinese bad behaviour”.

That gets us to Xi’s behaviour. Xi knows he’ll be president indefinitely, while the scandal-plagued Trump will be lucky to finish his four-year term. It’s also important to view Trump’s protectionist tantrum through the lens of a leader who needs to maintain street cred in Beijing.

As former Australian Prime Minister Kevin Rudd, an ardent Sinophile, puts it, perceptions matter greatly in authoritarian systems, too. “When these become matters of national face, then Chinese political leaders are not often all that different from other political leaders, and they need to be seen to be taking strong and firm action,” Rudd explains. Will Xi’s new absolute-power status go to his head and prompt an over-the-top response?

Xi’s party is divided between those itching to retaliate against Trump and those arguing against escalating a brawl with such an erratic White House. If Xi goes the former route, he has myriad ways to strike back.

Agriculture is an obvious target. Going after soya bean imports would slam the economies of Mississippi, Missouri and other US states. So would targeting corn or beef. Xi could impose exit taxes on goods manufactured in China in ways that savage Apple, General Motors and Wal-Mart. Cancelling Boeing orders could cost more than 180,000 American jobs overnight. Beijing could dump its $1.2 trillion of US government bonds, sending yields skyrocketing. Industries from pharmaceuticals to wine to machine tools also could be in harm’s way.

Asia isn’t yet in a full-blown trade war. But as Washington and Beijing exchange barbs, the rest of Asia, from Mumbai to Seoul, could be in for a rocky 2018 as markets recoil, credit dynamics shift and currencies go haywire.

On 25 January, Trump’s White House ended the 23-year-old-strong-dollar policy. That pits a president seeking a weaker exchange rate against new Federal Reserve Chairman Jerome Powell, who’s keen to hike rates four times this year. Tighter US monetary policy alone is threat enough for a region still traumatized by the Fed “taper tantrum” of 2013. The real fireworks could be yet to come as Trump pokes the Chinese dragon for reasons with which Freud would have a field day. Rather than do the hard work of restructuring America’s economy, Trump seeks to claw back jobs from the mainland. Stupid, as Li of China Iron and Steel might say? Sure, but also dangerous as the White House dares Xi to strike back in ways that blow up Asia’s year. Buckle your seat belts.

William Pesek, based in Tokyo, is a former columnist for Barron’s and Bloomberg and author of Japanization: What the World Can Learn from Japan’s Lost Decades.

His Twitter handle is @williampesek

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