US-China trade feud: Both sides seem locked in a Thucydides Trap

THE slow burning trade feud between China and the United States has finally flared into hostilities.

As of last week, America imposed tariffs on 818 products worth US$34 billion. These items vary, inter alia, from digital television sets to parts for aircraft and scientific equipment. US importers will now have to pay a 25 per cent border tax when these goods arrive in US ports. The Chinese responded in kind and have slapped a 25 per cent tax on US$34 billion of American goods exported to China. Beijing has targeted farm produce as well as cars and other automotive products - all coming from states that voted heavily in favour of Donald Trump in the 2016 presidential election.

There is more to come. The US is expected to impose taxes on an additional US$16 billion worth of goods in the coming weeks. And if Beijing again responds in kind with tariffs on US petroleum and chemical products, Mr Trump says that he will impose tariffs on an additional US$500 billion worth of Chinese goods - or nearly all of the China-made products going into the US. Beijing has vowed to match Mr Trump's moves measure for measure, except that it is very likely that China will run out of US imports to tax before very long. America exports only about US$130 billion in goods to China. So Beijing might have to resort to curbs on American companies operating or investing in China to get even.