The U.S. and China are not in a trade war, but there is potential pain ahead if the proposed tariffs on both sides go through, foreign policy expert Ian Bremmer told CNBC on Thursday.
“If we see the policies that the Americans and Chinese are talking about actually become implemented as policy, this is the two most important economies in the world, the most important bilateral relationship in the world becoming much more dangerous,” the president of geopolitical risk firm Eurasia Group said on “Power Lunch.“
“The impact on the global economy, the impact for geopolitical stability is clearly much greater if that goes badly.”
On Wednesday, China announced it may impose tariffs on $50 billion worth of U.S. goods. The move came after President Donald Trump unveiled a list of Chinese imports that he aims to target as part of a crackdown on what he deems to be unfair trade practices.
However, on Wednesday, National Economic Council Director Larry Kudlow told reporters it’s “possible” the proposed tariffs on China may not actually take effect.
“It’s part of the process. I mean, I would take the president seriously on this tariff issue,” Kudlow said. “You know, there are carrots and sticks in life, but he is ultimately a free trader. He’s said that to me, he’s said it publicly. So he wants to solve this with the least amount of pain.”
Bremmer says in order to go after China, it would be better for the U.S. to do it with its allies. However, getting rid of the Trans-Pacific Partnership is not the easiest way to get them on board, he said.
“You want to have both a big stick and a big carrot. The size of Trump’s stick is a little smaller because a lot of American allies are saying, ‘We don’t know if we can count on the United States long term. Do we really want to align with them?'” he added.
That said, Bremmer sees some of Trump’s foreign policy gambits paying off, particularly since the U.S. remains the world’s only superpower.
“If you have a president … who says he’s willing to break things and push other countries around, whether or not those countries like it, they don’t want to get in a fight with the United States, and they’re willing to let the president put a few points on the board.”
For example, he says he thinks there will ultimately be a new bilateral trade deal inked with South Korea that will be an improvement for the U.S.
The two nations recently reached an agreement on a revised trade pact that would effectively cut South Korea’s steel exports to the U.S. by about 30 percent.
“You have to give Trump credit for that,” Bremmer said.
Last week, the president said he may “hold up” the deal in order to use the agreement as leverage in any upcoming negotiations with North Korea over its nuclear program.
