A former top US diplomat foresees global trade tensions escalating this week as US President Donald Trump imposes the first of many threatened tariffs on China.
Kurt Campbell, who was assistant secretary of state for East Asian and Pacific affairs for President Barack Obama, spoke at Victoria University on Friday as part of a nationwide speaking tour.
Campbell said he believes tensions will escalate later this week when Trump's 25 percent tariffs on US$50 billion of Chinese goods are imposed from July 6.
"You have to step into the psychology of the president. The president believes that the leaders who have gone before him are weak and stupid, that they have not understood China and that he has caught China red-handed and he's the first one to say the trade relationship as it stood before will no longer continue," Campbell said.
"He believes President Xi hears that and his calculus is 'aha, I'm now confronted by a powerful leader of the United States, of course he's right, and we're caught red-handed'. So when the United States levies its US$50 billion, China will say okay, let's go back to square one.
"My experience in the last several days suggests to me that is the furthest thing from what will actually happen and that China in fact will respond with either [US$50 billion in tariffs] or something close to that, and that will outrage the president and he will react with much larger numbers," Campbell said.
"You're going to see potentially hundreds of billions of dollars acted on, which has tremendous corollary consequences in the region and elsewhere. China's response to that will be going after iconic firms in China - Boeing, Ford, you can go down the list. Down that path lies the demolition of the global economy."
Campbell said he thought Trump would consider bilateral engagement with New Zealand and had heard discussion about that but stressed it was "very premature" and he wasn't sure if New Zealand would be interested in such a deal.
"There is some interesting synergies between our two economies," Campbell said. "There has been discussion about Japan, I don't think Prime Minister Abe is as interested in that, there's been some discussion about Thailand and the Philippines - it's not clear that either of those countries, at least in the way that we thought about them in the past, are mature enough, like have the right checks and balances and ecological protections. I've also heard New Zealand, much in the way we heard of Australia in the 1990s."