Mr Donald Trump going mano a mano with Russian President Vladimir Putin eclipsed all else at last week's Group of 20 (G-20) summit. Yet history will show that the atmospherics surrounding Mr Trump's dealings with Chinese President Xi Jinping in Hamburg were far more fateful.
It's no coincidence that the United States President's exchange with his Chinese counterpart seemed an afterthought - something Mr Trump's people squeezed in around a baroquely choreographed Putin matchup (even confusing China and Taiwan in the readout).
Blame it on the bruised ego of a man who thought he'd got the better of Mr Xi. Transactional Trump figured that by inviting Mr Xi to his Mar-a-Lago Florida retreat and serving him the "most beautiful piece of chocolate cake that you've ever seen", Mr Xi would magically force Pyongyang to denuclearise the Korean peninsula.
The real story here is how Mr Trump's disappointment, coupled with increasing chaos back in Washington, greatly increases the odds he'll make good on his China trade war threats.
The European trip was a welcome break from Mr Trump's domestic woes over 2016 election probes, sliding approval rates and a legislative agenda in tatters. Desperation to alter the narrative is sure to have Mr Trump pining for April 6, the best day of his young presidency. That was when he fired 59 Tomahawk missiles at Syria, winning applause around the globe and even throwing opponents in Washington off balance.
As President Trump looks to relive that high, he has two obvious targets. Firing Tomahawks at North Korean leader Kim Jong Un would be too risky even for a leader not known to read intelligence briefings. That leaves a trade war, which played so well on the campaign trail.
There are already hints Mr Trump's team is on the verge of roiling steel markets. That may set the stage for 45 per cent tariffs against Chinese imports.
Mr Trump, remember, is desperate for a win, any win, to buttress his image as a strong leader ready to take on a government "raping" US workers. That it would be a Pyrrhic victory hardly matters. A president willing to toss 20 million Americans under the bus to claim a win on healthcare probably won't mind putting Walmart out of business if he can claim a triumph.
Mr Trump, meanwhile, seemed to relish his isolation within what some pundits called the Group of 19. Between scrapping the Trans-Pacific Partnership (TPP) and Paris climate accord, he seems more interested in breaking things for the sake of shock value than acting in America's best interests.
And that's why Asia must now brace itself for the Trump tantrum in global markets. While the target would be Mr Xi's China, much of the rest of Asia would be collateral damage. Singapore, South Korea, Taiwan and other highly open, trade-reliant economies would suffer the most initially.
The fallout would complicate Japan's efforts to end deflation, wreak havoc for current account- deficit nations from Indonesia to India, slam remittance-addicted populations from the Philippines to Sri Lanka, create new headwinds for reform laggard Malaysia, and have chilling effects on investment darlings like Vietnam.
Mr Trump's worldview seems stuck in 1985, back when great powers could control currencies and bring others to heel with blunt instruments. But as World Economic Forum officials stress, at least 80 per cent of today's trade is supply-chain trade. Labour skills, cost dynamics and technological advancements led to a splintering of production. Parts and processes that go into inter- mediate goods are often produced in different corners of the globe. The iPhone, for example, seems more like an Airbus-like consortium of American, Chinese, Japanese, Korean and Taiwanese producers than a mere Apple product.
The risk that Mr Trump will destabilise Asia's biggest economy will curb investment and spending patterns. For all Mr Xi's assurances to the contrary, Beijing's success in moving from exports and excessive investment to services is just beginning.
Since 2008, China has supported growth with tens of trillions of American dollars of new credit. That's led to competing bubbles in debt, shadow-bank activity and real estate. Mr Trump's actions could easily lop 5 per cent off China's gross domestic product, as Oxford Economics and others have estimated.
Then there's how Mr Xi would retaliate. Boeing might have to shed 180,000 jobs if China bought Airbuses instead, according to Peterson Institute for International Economics. Missouri and Mississippi would get savaged by soya bean curbs. Asian markets would crack on any suggestion of Beijing dumping its US$1.1 trillion (S$1.5 trillion) of US Treasuries.
That's particularly true of Prime Minister Shinzo Abe's Japan, Washington's biggest banker. Mr Trump's bluster would be the death knell for Abenomics, the best chance Asia's No. 2 economy has had in decades to revive growth.
Oddly, Tokyo made the biggest contribution at last week's festivities. By agreeing with the European Union to scrap tariffs on 99 per cent of goods on the eve of the summit, Japan reminded the G-20 of its raison d'etre and shamed America's isolationist turn under Mr Trump. If this deal comes off as envisioned, Mr Abe will have the biggest reform win of his 4½-year premiership. Japan may soon add more to the global economy than its deflation subtracts.
Mr Abe should use this momentum to prod peers in Singapore, Malaysia, Vietnam, Australia and other TPP members to get the enterprise back on track. Perhaps, even invite China to join.
Mr Abe must tread carefully, of course, lest Japan finds itself on the receiving end of Mr Trump's Twitter rants. Tokyo's weak-yen policy and Toyota sales in the US have already found themselves in @realDonandTrump's crosshairs.
But the most important economic story of the moment is how Mr Trump misjudged his seductive powers over China's strongest leader since Deng Xiaoping. The more this disappointment dawns on the negotiator-in-chief, the more China's trade flows - and Asia, more broadly - are in harm's way. The next thing Mr Trump breaks may be Asia's growth trajectory.
- The writer, a Tokyo-based journalist, is a former columnist for Bloomberg and author of Japanisation: What The World Can Learn From Japan's Lost Decades.
