Chinese newspaper warns of tax war

US President Donald Trump walks after arriving on Marine One on the South Lawn of the White House in Washington, DC, on April 28, 2017.
US President Donald Trump walks after arriving on Marine One on the South Lawn of the White House in Washington, DC, on April 28, 2017. PHOTO: AFP

Trump's plan to slash taxes could see American firms moving operations from Asia back home

Most Asian capitals heaved a collective sigh of relief as US President Donald Trump marked his 100 days in office yesterday, because he has failed to carry out most of the threats he made during his campaign and the run-up to his inauguration.

However, anxieties remain as the American leader has proved to be as unpredictable as he showed he could be while on the campaign trail. One analyst, Professor Shi Yinhong of Renmin University in Beijing, called him "the most volatile" US president in many years.

TRADE AND ECONOMICS

The Chinese like Mr Trump, said Prof Shi, because he did not carry through with his threats to name China a currency manipulator and slap heavy tariffs on Chinese goods.

But some Chinese leaders are worried about the US plan to overhaul its tax system, which would see steep cuts in income tax and lower corporate tax from 35 per cent to 15 per cent. If approved, it could see companies moving their operations to the US from Asia.

Anxieties remain as the American leader has proved to be as unpredictable as he showed he could be while on the campaign trail. One analyst, Professor Shi Yinhong of Renmin University in Beijing, called him 'the most volatile' US president in many years.

A commentary in the People's Daily newspaper warned that the US tax cuts would provoke a tax war.

Elsewhere in Asia, there was much disappointment when Mr Trump pulled out of the 12-nation Trans-Pacific Partnership trade deal right after taking office.

There is also anxiety in many countries, from Japan and South Korea down to Indonesia, which have trade deficits with the US as Mr Trump has ordered a study of these deficits and ways to redress them.

In India, there is worry over the US policy to tighten work visa regulations which could affect the movement of Indian professionals. This is particularly after the White House recently accused top Indian software firms such as Infosys and Tata Consultancy Services of unfairly cornering the H1-B work visas, used by Indian software firms to send their workers to the US for onsite work.

In the Philippines, the initial fear that Mr Trump's moves to protect American jobs could affect its outsourcing industry has passed.

"The jobs he wants to protect are blue-collar jobs, not IT jobs" common in the outsourcing firms, explained stock market analyst Luis Limlingan.

SECURITY AND GEOPOLITICS

The US' security allies and partners are relieved that Mr Trump has shown in the past months that he wants to stay engaged in the region. There were fears that he might pursue an isolationist policy given his narrow "America first" rhetoric.

His administration moved swiftly to deal forcefully with the North Korean nuclear issue, much to the delight of the South Koreans.

Secretary of State Rex Tillerson made clear during his visit to North-east Asia last month that the US' "strategic patience" was over and that all options, including a military one, are on the table in dealing with the North's nuclear and missile programmes. The US then sent the aircraft carrier USS Carl Vinson to the Korean peninsula in a show of force.

It also pressured the Chinese to do more to rein in Pyongyang.

Dr Go Myong Hyun of the South Korean think-tank Asan Institute of Policy Studies said Mr Trump performed "beyond expectations".

"South Korea has been asking the US to put North Korea at the top of US priority, and that's exactly what (Trump) did this time," said Dr Go.

However, he warned against the US doing too much. "It is a fine balance between pressuring North Korea and avoiding accidental escalation. If Trump does too much, there is a risk of accidental escalation."

Indeed, Japan was alarmed by the Americans' sudden strike on a Syrian airbase that military experts said was meant to intimidate Pyongyang, prompting its envoys to seek quiet reassurances that any strike on the North will be discussed beforehand.

South Korea is pleased that Mr Trump did not demand that more be paid for US troops stationed there and that he reaffirmed the US-South Korea military alliance.

Tokyo is likewise relieved that Washington reaffirmed its security obligations under the US-Japan alliance, including to defend the Senkaku/Diaoyu islands claimed by both Japan and China.

Security analyst Tosh Minohara of Kobe University said: "There was a good chance that Mr Trump will go deeper into the Middle East and disregard Asia. But he did not, and so Japan is relieved."

In Manila, while President Rodrigo Duterte has continued to complain about the presence of US troops in the Philippines, that has not caused a palpable shift in defence relations between the two countries, noted defence analyst Jose Antonio Custodio. It helped that Mr Trump has refrained from criticising Mr Duterte's human rights record over his brutal crackdown on drug crime.

Mr Trump's fight against terrorism has elicited different reactions in the region. It struck a chord with the Hindu nationalists of India but caused wariness in Indonesia.

The right-wing group Hindu Sena held prayers for a Trump victory and has not been disappointed.

"He has taken strong action against terrorism. He has bombed Syria and Afghanistan," said the group's president Vishnu Gupta. He believes the Trump administration will be tough on India's rival Pakistan, a Muslim state.

However, Mr Trump's attempt to order a travel ban against several Muslim-majority countries after he was elected did not go down well with Jakarta although Indonesia, which has the world's largest Muslim population, was not on the list.

The visit of US Vice-President Mike Pence earlier this month did, however, take the edge off tensions between the two countries. His visit to a mosque and meeting with religious leaders assuaged concern.

"Hopefully, Pence's visit indicates a change in attitude, at least that they are moving away from the stance that they don't like Islam much," said Indonesian Ulema Council chief Maruf Amin.

Taiwan, however, is deeply disappointed after the initial elation that followed a phone call between Mr Trump and its President Tsai Ing-wen, a break with protocol as the US and the island have no formal diplomatic ties.

And last Thursday, Ms Tsai, who had earlier expressed the hope of speaking on the phone with Mr Trump again, was given the cold shoulder when Mr Trump told Reuters he had no plans to do so as he did not want to create problems for Chinese President Xi Jinping.

Now the island, seen as a breakaway province by Beijing, is worried about whether the US will sell arms to it. Political analyst Chen I-hsin of the Chinese Culture University is not optimistic, saying that Mr Trump is a realist who does not want to rock the boat with China.

WHAT LIES AHEAD

There may be relief for now, but Asian countries are under no illusion that all will be hunky-dory.

China, for one, remains very wary of Mr Trump because "he is irresponsible, changeable and likes to blackmail", said Prof Shi.

He did not elaborate, but Mr Trump, in a tweet earlier this month to explain why he did not declare China a currency manipulator, said: "Why would I call China a currency manipulator when they are working with us on the North Korean problem? We will see what happens!"

Said Dr Minohara: "I think this is the quiet before the storm. It looks like the US has reverted back to its conventional foreign policy - but only on appearance.

"Mr Trump is his own person and is quite different from previous presidents. We cannot judge him by traditional game theory because he is playing his own game."

•Additional reporting by Chang May Choon, Nirmala Ganapathy, Walter Sim, Wahyudi Soeriaatmadja, Raul Dancel and Jermyn Chow

A version of this article appeared in the print edition of The Sunday Times on April 30, 2017, with the headline 'Chinese newspaper warns of tax war'. Print Edition | Subscribe