World

Lose-lose tariff game for US and China. Java blackout affects millions. India revokes Kashmir’s status. Two mass shootings in US. By Jonathan Pearlman.

Beijing and Washington play a lose-lose game

Chinese President Xi Jinping walks the red carpet outside the Great Hall of the People in Beijing.
Credit: Wang Zhao / AFP / Getty Images

GREAT POWER RIVALRY

China: When Donald Trump launched his trade war against China last year, he claimed such wars are “good, and easy to win”. He has been pushing this line since the 1980s, despite warnings from economists, including his advisers, that tariffs will hurt Americans, particularly those on low incomes, and that any victory will be pyrrhic.

But he pressed ahead, and Xi Jinping, until this week, responded, as expected, with retaliatory tariffs. On Monday, however, Beijing changed tack, allowing a sudden weakening of the yuan to its lowest level since 2008. This followed Trump’s announcement, four days earlier, that further tariffs would be imposed on $US300 billion worth of goods, ending a truce the two leaders reached only in June.

China’s currency dip was largely symbolic – the yuan fell by just 1 per cent, which it would have anyway if it were not a state-controlled currency. But the move marked a further escalation in the conflict between the world’s two largest economies. In response, global shares slumped and the United States officially labelled China a “currency manipulator” – the first time it has done so since 1994. Both sides threatened further tariffs.

Xi cannot match Trump’s tariffs because China exports far more to the US than it imports. But lowering China’s currency allows Beijing to partly counter the tariffs by making its exports cheaper and its imports more expensive.

Trump thinks, incorrectly, trade is a zero-sum game. The escalating battle is likely to hurt China more, yet the US will still lose, as will much of the rest of the world. On Tuesday, Trump’s economic adviser, Larry Kudlow, said the White House is committed to negotiations with Beijing. Of his escalating tariffs, the US president tweeted: “And I’ll do it again next year if necessary!”

THE NEIGHBOURHOOD

Indonesia: Power blackouts happen regularly in Indonesia, but usually affect limited areas and can be relied on to end quickly. But an outage across Java last Sunday, which affected tens of millions of people, was the country’s worst in more than a decade. It began at midday and lasted more than nine hours, leaving trains stuck in tunnels and causing traffic chaos in Jakarta. Shops closed, electronic payments went unprocessed and dozens of homes burnt down due to short circuits or people using candles.

On Monday night, the state-owned electricity company PLN finally declared that the blackout was over.

“Alhamdulillah [praise be to God], the entire system has returned to normal again and we will maintain its stability,” said PLN’s acting president director, Sripeni Inten Cahyani.

The company initially said the blackout was caused by a lightning strike. Police later said tall trees may have interfered with powerlines.     

But some analysts blamed widespread corruption in Indonesia’s energy sector and a lack of government oversight. In April, for instance, the former head of PLN was named in a corruption case involving a new power plant. Since then, the company has had three acting president directors.

The Indonesian president, Joko Widodo, is trying to address corruption in the sector but also hopes to involve PLN in his plan to boost the country’s power supply. On Monday, he visited the company’s head office and said: “My question is, all of you ladies and gentlemen are smart, experienced people in electricity. So why wasn’t it calculated that a problem could occur and not pre-empted?”

DEMOCRACY IN RETREAT

India: “All is normal,” declared the governor of Kashmir last week as India deployed 35,000 troops to one of the world’s most volatile regions and ordered visitors, both foreign and domestic, to leave.

At the time, India claimed it was concerned about a terrorist threat. But on Monday the real reason emerged, when it was announced the Indian government was abolishing the special status of Jammu and Kashmir, the country’s only Muslim-majority state. This involved revoking article 370 of the constitution, which was introduced 70 years ago to give the state a measure of autonomy. A separate article that prevents non-Kashmiris buying property in the region is also being repealed, which could change its demographics.

India also increased security measures, including cutting internet and phone services, imposing curfews, detaining local leaders, flooding the streets with police and soldiers and banning gatherings of more than four people.

Mehbooba Mufti, a prominent local political leader, was put under house arrest but was first able to tweet that the move will have “catastrophic consequences”. She wrote: “Today marks the darkest day in Indian democracy.” Pakistani Prime Minister Imran Khan said he feared India would conduct “ethnic cleansing” in the region.

Kashmir is divided between India, Pakistan and China, which all dispute the current border. The region has been at the centre of three wars between India and Pakistan – both nuclear powers – since 1947. The Indian side has experienced a Muslim separatist insurgency since 1989, which has left more than 70,000 people dead.

But the revocation of article 370 and the integration of the state into India has been a long-held dream of the country’s Hindu nationalists. The ruling Bharatiya Janata Party, headed by Prime Minister Narendra Modi, a staunch nationalist, won re-election in a landslide earlier this year. It appears this victory has further emboldened him to move India away from its secular foundations. Donald Trump recently offered to “mediate” the Kashmir dispute, which may have encouraged Modi, who does not want to be drawn into talks, to act quickly.

An editorial in The Indian Express said the revocation was about “rewriting history” and about “bringing in a new idea of India, with the stamp of Narendra Modi firmly on it”.

SPOTLIGHT: Mass shootings

United States: Mass shootings in America in 2019 to August 5: 255

Guns in the US: 393 million

People in the US: 329 million

Proportion of Americans who know someone who has been shot: 44 per cent

Proportion who want tougher gun laws: 61 per cent

Bills the National Rifle Association tried to influence in 2018: 273

Domestic far-right terrorist attacks from 2001 to 2016: 73 per cent

Domestic Islamic terrorist attacks from 2001 to 2016: 27 per cent

White households with a gun: 49 per cent

Black households with a gun: 32 per cent

Deaths in the US from gun violence: 4.43 per 100,000 people

Deaths in Australia from gun violence: 0.2 per 100,000 people

Days that Donald Trump was in office before he softened gun laws: 39

Shooting victims at El Paso, Texas, last Saturday: 22

Shooting victims at Dayton, Ohio, last Sunday: 9

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This article was first published in the print edition of The Saturday Paper on Aug 10, 2019 as "Beijing, Washington play a lose-lose game". Subscribe here.

Jonathan Pearlman
is The Saturday Paper’s world editor and the editor of Australian Foreign Affairs.