Did Trump just start a trade war with China?

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President Trump’s decision Monday to slap tariffs on imports of solar panels and washing machines risks inflaming tensions with China and other big U.S. trade partners.

Trump has long complained about lop-sided trade with countries such as China and South Korea, saying it hurts American workers. But during his first year in the White House, he largely held off on threats to put up new barriers.

That changed this week with the announcement of tariffs, which the U.S. government said are aimed at protecting American companies from cheap foreign imports. Trump is also due to decide on measures against steel and aluminum imports in the coming months.

China on Tuesday expressed “strong dissatisfaction” over the move to impose tariffs of up to 30% on U.S. imports of solar panels, saying it “aggravates the global trade environment.”

But experts say it’s too early to determine whether the world’s two largest economies are destined for a damaging escalation of trade measures against each other. The U.S. tariffs announced Monday are not, on their own, a huge provocation to China.

“If this is the start of a trade war, the opening salvo was launched with a pea shooter,” said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.

Related: Trump and China: 2018 could get nasty

It would be “a mistake to exaggerate [the] significance” of the new tariffs, Kennedy added, pointing out that there are already more than 150 other U.S. trade measures in place against various Chinese products.

But tensions may heat up in the coming months as Trump decides what action to take on other trade issues.

The U.S. could “bring out the big guns” when it considers the results of a sweeping investigation into alleged Chinese theft of U.S. intellectual property, Kennedy said.

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‘China would lose more’

Some experts think China will avoid responding in kind with its own trade measures — for now at least.

Beijing could in theory put tariffs on things like U.S. agricultural goods or make life more difficult for U.S. companies doing business in the country through regulatory requirements, said Louis Kuijs, head of Asian economics at research firm Oxford Economics. But he doesn’t think China will want to provoke the U.S. at this stage.

Related: New Pacific trade deal could leave U.S. playing catchup

“While both economies would lose from a trade war, China would lose more,” said Kuijs, simply because Chinese exports to the U.S. are about four times as big as U.S. exports to China.

China is reluctant to disrupt “a relationship that clearly has served them well for decades” by responding with tough measures of its own, said James Wang, an economics professor at City University of Hong Kong.

He also doubts the Trump administration will tighten the screws on trade with China too hard because it still wants Beijing’s support in tackling major global security issues like North Korea.

“Trump is a transactional president,” Wang said. “He may change his tune [on trade barriers] depending on the extent to which he needs China’s cooperation.”

china us trade

Jarring start to a big week

The new tariffs announced by the U.S. — which also prompted angry responses from South Korea and Mexico — come at the start of a big week for global business.

The U.S. is entering a critical phase in talks with Mexico and Canada to renegotiate NAFTA, the free trade deal that links the three nations. The negotiations resume Tuesday.

Trump is also scheduled to attend the World Economic Forum in Davos, a gathering in the Swiss mountains that brings together heads of state, CEOs and other business leaders.

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The U.S. administration’s latest actions are likely to fuel debate at Davos, where China’s President Xi Jinping delighted the crowd last year with a robust defense of free trade.

One person familiar with Trump’s thinking told CNN earlier this month that the president views his Davos visit as a “victory lap” on the world stage after he and fellow Republicans successfully slashed the U.S. corporate tax rate.

‘Hardline stance’ on manufacturing

The decision to impose tariffs on washing machines — a key South Korean export — suggests the Trump administration is willing to tackle its strongest allies, as well as big rivals like China.

It “sends a clear signal that the administration intends to maintain its hardline stance on trade in manufacturing goods,” said Troy Stangarone, senior director at the Korea Economic Institute, a U.S. think tank.

The South Korean government said it plans to complain to the World Trade Organization over the measures.

South Korea and the U.S. are currently in talks to renegotiate their free trade agreement, which Trump has previously slammed as “horrible” and a “job killer.”

— Serenitie Wang, Taehoon Lee and Jethro Mullen contributed to this report.

CNNMoney (Hong Kong) First published January 23, 2018: 6:16 AM ET

White House aide Stephen Miller, former Santa Monica High student, is at center of immigration debate

(Frederic J. Brown / AFP/Getty Images)

President Trump has discussed traveling to San Diego to see border wall prototypes, and White House officials are known to have been discussing plans for a possible trip, but a Trump administration official said Monday that there is still nothing in that regard on Trump’s short-term schedule “as of now.”

The official requested anonymity to discuss the internal schedule, which is updated often and usually not made public until days or hours before Trump makes a public appearance.

Trump plans to deliver the State of the Union address to Congress on Tuesday, Jan. 30, and is likely to talk about his signature campaign promise, the border wall. Presidents traditionally travel after those speeches to promote their agendas.

NAFTA is close to falling apart

NAFTA explained

President Trump could soon kill a major trade deal with Mexico and Canada if huge compromises aren’t made this week.

Round 6 of the renegotiation of NAFTA, the pact between Mexico, Canada and the U.S., starts Tuesday in Montreal, Canada.

No major progress has been made on key issues through the first five rounds. Only one more round after this week is scheduled, and Trump continues to repeat his threat that if he doesn’t get the deal he wants, he’ll withdraw.

“It’s going to be the decisive round,” says Scott Sinclair, senior fellow at the Canadian Centre for Policy Alternatives.

Trump made NAFTA a core campaign issue. He argues that Mexico is taking jobs and billions of dollars in commerce away from the United States. He also believes a new deal will help the U.S. finance payment for the border wall.

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About 14 million U.S. jobs depend on trade with Canada and Mexico, according to the U.S. Chamber of Commerce, a business advocacy group.

Negotiators face a number of challenges this week.

Time is running out

Mexican presidential campaigns kick off in March and the election is in July. Mexican leaders have long warned that they can’t ratify a new agreement in Mexico during election season.

President Enrique Peña Nieto can’t run due to term limits, and his party’s opponent, Andres Manuel Lopez Obrador, known as AMLO, is leading by a wide margin in the polls. AMLO has promised to get tough on trade with Trump and completely restart NAFTA talks. If elected, he would take office in December.

On top of that, U.S. midterm elections take place this fall. It’ll be hard to ratify a new deal in the United States as that vote draws near.

“There are Mexican politics just as there are American politics. So far on trade, the Trump administration doesn’t seem to be playing either well,” says Phil Levy, senior fellow at the Chicago Council on Global Affairs.

Economists long warned that the Trump administration’s timeline was unrealistic to get a new deal done. On top of elections, there are several bureaucratic steps the Trump administration and Congress must take before ratifying NAFTA, according to U.S. trade laws.

Many experts say the most likely scenario is that NAFTA talks get kicked way down the road to 2019. But among the other two alternatives — striking a deal or killing it — there’s no doubt what has better odds.

“It’s far more likely that the president decides to blow it up than you get a conclusion,” adds Levy. “I think it’s extremely unlikely you get a positive outcome out of” Round 6.

Related: African nations set to approve huge free trade deal

Top of Trump’s ‘extreme proposals’: Manufacturing cars

The number-one issue on the negotiating table involves how and where cars are manufactured in North America.

Under the current NAFTA, 62% of the parts in a car sold in North America must come from the region. It doesn’t matter if the parts come from Canada, Mexico or the United States. They just need to be sourced from within the continent.

Trump’s trade team wants to raise that threshold up to 85%. The caveat: Trump’s negotiators are proposing that half of auto parts sourced from North America come specifically from the United States. The rest would go to Mexico and Canada.

In other words, the Trump administration is asking for half of the pie, while Canada and Mexico would presumably each get a quarter.

Mexican Economy Secretary Ildefonso Guajardo told CNNMoney last April that a U.S.-specific rule would be unacceptable.

In November, Canadian Foreign Minister Chrystia Freeland referred to this as one of Trump’s “extreme proposals” that “we simply cannot agree to.”

Cars are such a big deal because the amount of vehicles and auto parts that come into the United States from Mexico make up the vast majority of the U.S. trade deficit with Mexico. And Trump’s top priority for a new deal is one that hacks away at the deficit.

Related: Killing NAFTA would cost 300,000 American jobs, analysis says

The other ‘poison pills’ on the table

Tom Donohue, CEO of the U.S. Chamber of Commerce, said in October that the Trump administration has “several poison pill proposals” for NAFTA. One of them is the so-called sunset clause.

Under that proposal, NAFTA would terminate every five years unless all three countries agreed to sign on for another five years. Mexico and Canada say this is another deal breaker.

Some outside experts argue that the sunset clause proposed by the Trump administration would cause too much uncertainty for businesses trying to invest long-term in Mexico or Canada.

Guajardo, Mexico’s top negotiator, has said he will propose an alternative of reviewing the economic impact of NAFTA every five years, but he can’t agree to an automatic termination.

Whether negotiators make those types of compromises this week is exactly what needs to happen for NAFTA to survive, experts say.

“The thing to watch for is — is there any sign that they’re moving towards negotiable positions?” says Levy. Or more bluntly, “Are they even on the same page?”

CNNMoney (New York) First published January 22, 2018: 6:51 AM ET

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