A trade war between the U.S. and China is about to start, and there will be probably be “escalation upon escalation,” warned Geoff Raby, Australia’s former ambassador to China.
Ahead of the expected Friday implementation of American and Chinese tariffs, Raby told CNBC that “it looks like the first shots to the trade war are about to be fired.”
China, for its part, was already calling the tariff threats between Beijing and Washington a “trade war” in June.
“I thought that by now a negotiated solution would have been found,” he told CNBC’s Martin Soong, adding that it seems the U.S. has “walked away” from any potential deal.
U.S. President Donald Trump said on Thursday that tariffs on $34 billion worth of Chinese goods will kick in at 12:01 a.m. EST on Friday morning. Another $16 billion are expected to go into effect in two weeks, he said. He told reporters he would also consider imposing additional tariffs on $500 billion in Chinese goods, should Beijing retaliate against the already-scheduled actions.
China has said it will not “fire the first shot,” but its customs agency made clear on Thursday that Chinese tariffs on U.S. goods would take effect immediately after U.S. duties on Chinese goods kick in.
Raby, who was also his country’s former ambassador to the World Trade Organization, said that Trump seemed to be driven by “very short-term political considerations” ahead of U.S. mid-term elections in November.
“He’s escalated the dispute, the mid-terms are coming up, he’s polling well, and tough rhetoric coming out of the White House seems to be playing well with his base.”
He called it a “big risk” for the world trading system that its key player — the United States — is driven by such considerations.
“We’ll probably see escalation upon escalation. China has made it absolutely clear,” Raby concluded.
“It cannot show weakness in the face of the United States … they have to respond. So I think this comes to some sort of end once there’s been a lot of damage done and people start to come to their senses.”
— CNBC’s Chloe Aiello contributed to this report.
