President Xi Jinping's head must be spinning as his U.S. counterpart Donald Trump ropes China into his impeachment mess.
Yet his calls for Beijing to investigate Joe Biden, Trump's main rival, ahead of the 2020 election are the least of Xi's worries. The U.S. president is melting down in plain sight, and as his legal jeopardy increases, he grows more likely to strike out wildly. Trade-reliant economies across Asia are in harm's way.
Already the costs of his trade war are rising fast. Take Singapore, whose open economy often acts like an early-warning system for global trade. Its 9.8% drop in August exports was the sixth consecutive year-on-year drop, following an 11% decline in July.
Japan and South Korea are skirting recession as Trump's tariffs hit Chinese demand and upend supply chains. Central banks from India to Indonesia to Australia are under pressure to cut interest rates to offset mounting headwinds.
This in fact may be the calm before Hurricane Donald strengthens into a category-five storm. Trump's legal peril surged last week as evidence grew that he pressured Ukraine for dirt on Biden, former U.S. Vice President, and threatened to withhold aid for the country. Trump put the moves on Australia and the U.K. too, we read.
There is no telling what a caged, paranoid and desperate White House facing existential threats might do. Here are 10 areas of possible fallout for Asian economies and markets.
One: new China tariffs. Trump will use whatever executive actions he can to change the news cycle and reassure his base, given the dwindling chance of him passing legislation. The lowest-hanging fruit is raising taxes on $500 billion of Chinese goods. Currently, levies range from 10% to 25%; even just threats to hike taxes to 30% or higher would slam markets.
Two: alarmingly creative ideas to contain China's rising influence. Trump has suggested banning American investments in Chinese companies and delisting mainland businesses trading on U.S. exchanges. These are Ideas that might make socialist Senator Bernie Sanders blush. Telecoms giant Huawei may merely be the vanguard of Trump's assault on corporate Asia.
Three: taxes of 25% on imports of cars and auto parts. Trump is livid that his trade deal with Japan got drowned out by the impeachment drama. He also may be miffed over reports Prime Minister Shinzo Abe got the better of him. While a car tax might cheer Trump supporters, it would devastate Asian manufacturing dynamics and set back living standards.
Four: expanding the trade war to new theaters. Trump plans $7.5 billion of European tariffs beginning October 18. While this move relates to E.U. subsidies to its aerospace champion Airbus, additional steps cannot be ruled out. Might Trump threaten a bigger trade conflict to help British Prime Minister Boris Johnson, his pal, gain leverage in the Brexit talks? Really, anything is possible.
Five: dollar devaluation. Trump desperately fears a recession would imperil his reelection. Weak news on U.S. manufacturing and services in September sent the dollar to a four-week low last week. The odds Trump might make good on threats to weaken an exchange rate that is "killing us" may be rising as we speak.
Six: firing Federal Reserve Chairman Jerome Powell. Trump has called the Fed under Powell -- his hand-picked choice -- "crazy" and a "bigger problem than China." You can bet that a White House flouting Congressional subpoenas is cooking up a rationale to dump Powell.
Replacing a policymaker who oversees the reserve currency with a human ATM would unnerve markets everywhere and threaten the value of the $2.2 trillion of U.S. Treasuries held by Japan and China.
Seven: bizarre geopolitical horse-trading. Last week brought reports of a call with Xi during which Trump sought to sacrifice Hong Kong. Trump reportedly told Xi he would stay quiet on Hong Kong's pro-democracy protests in exchange for a trade deal. Might Trump also sell out Taiwan to woo China's strongman? I would not doubt it.
Eight: military adventurism. The high point of Trump's 33 months in office so far was in April 2017 when he fired 59 Tomahawk missiles into Syria. Should a besieged and desperate Trump wish to relive that high, he might also see it as a chance to distract the nation.
He could threaten to attack Iran, or find that his "love" for Kim Jong Un has evaporated as the North Korean dictator is on a missile-testing tear.
Nine: dumping more global institutions. Trump enlivened his base by pulling out the Trans-Pacific Partnership, the Paris climate accord and the Iran nuclear deal. One cannot rule out Trump leaving the World Trade Organization, the International Monetary Fund, the United Nations or the Group of Seven nations. He could also drop support for the Asian Development Bank.
Ten: redouble his Twitter fury. As Trump's troubles cancel his global clout -- why would China make a deal with an impeachment-hobbled White House? -- we have no idea what market-shaking lunacy might pulsate from his smartphone.
All this means the only bull market in the months ahead may be in anti-nausea medication sales.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."