Tariffs, Stalemate, War? The Aftermath of the Trump-Kim Breakup

(Bloomberg) -- The canceled summit between Donald Trump and Kim Jong Un leaves both men with big decisions to make if they want to avoid a march to war over North Korea’s nuclear program.

Their actions in the weeks ahead open a range of possibilities with broad implications for Northeast Asia. Chinese President Xi Jinping could see his trade fight with Trump further entangled with the North Korea dispute, while South Korea’s Moon Jae-in could be forced to choose between his dream of reconciliation with Pyongyang and the security demands of his U.S. ally.

Here are three possible scenarios for where we go from here:

1. Protracted Stalemate

Trump’s abrupt cancellation of his summit with Kim, which had been planned for June 12 in Singapore, highlighted a key criticism of his surprise decision to hold the meeting in the first place: Neither the U.S. nor North Korea had done enough advance work to ensure a successful outcome.

Tariffs, Stalemate, War? The Aftermath of the Trump-Kim Breakup

Almost immediately after Kim committed to “complete denuclearization” in his April 27 declaration with Moon, disagreements over the term began to simmer. Kim’s harsh statements -- including one on Thursday calling Vice President Mike Pence “stupid,” which led Trump to cancel the meeting -- protested Trump administration references to a fast-track “Libya model” requiring him to give up his nuclear weapons without getting anything in return.

Still, both Trump and Kim have left open the door to rescheduling a summit they both appear to want. In a more conciliatory missive on Friday, North Korea said it “inwardly highly appreciated” Trump and hoped his more flexible approach would lead to a deal. That could give diplomats the space they need to build trust behind the scenes and set more realistic goals. Permanent United Nations sanctions against North Korea mean Trump has time on his side.

“We have to remember, it was North Korea who asked for this meeting -- they have more to gain,” Sean King, a senior vice president at Park Strategies LLC, told Bloomberg Television. “Trump may have called their bluff, and good for him if that’s what the case is.”

2. Trade War

North Korea and trade have long been linked for Trump -- and that puts China in the firing line. When Trump needed Xi’s help with Kim, he spared China from harsh trade actions he promised on the campaign trail. When Kim began talking, he turned the guns on Xi.

Now, Trump must decide whether escalating those trade disputes will increase his leverage over North Korea. Trump’s speculation that Xi has encouraged Kim to take a harder line suggests that he might look for a renewed confrontation with China -- a view that has bipartisan support in Washington these days.

Tariffs, Stalemate, War? The Aftermath of the Trump-Kim Breakup

Besides following through on threats to levy tariffs on more than $150 billion dollars of Chinese goods, Trump could subject China’s massive state-owned banks to the same rough treatment as telecommunications equipment maker ZTE Corp. That could prompt retaliation by Xi, who has also rebuilt his country’s “strategic” bond with North Korea in the recent diplomatic flurry.

“The cancellation of the summit raises China trade risk,” said Ryan Hass, who directed China policy for the National Security Council’s China during Obama administration and is now a Brookings Institution foreign policy fellow. “President Trump now will feel fewer constraints on pressing China to acquiesce to his requests.”

3. Bombs Away

In his remarks on Thursday, Trump warned North Korea the U.S. military was ready to respond if Kim’s regime took any “foolish or reckless acts.” While Kim has already declared his nuclear program complete and suspended missile tests, any increased hostilities may prompt him to resume provocations: On Thursday, his regime warned of a “nuclear-to-nuclear showdown” with the U.S. if talks failed.

Trump’s administration now has even more hawks than it did last year, when he warned of “fire and fury” against Kim’s regime: John Bolton, his new national security adviser, penned an op-ed for the Wall Street Journal in February titled “The Legal Case for Striking North Korea First.” A North Korean nuclear attack on Seoul and Tokyo could kill as many as 2.1 million people and injure another 7.7 million people, 38 North said in a report last year.

Tariffs, Stalemate, War? The Aftermath of the Trump-Kim Breakup

There’s no reason to suspect either Trump or Kim wants to push things this far. If anything, Kim’s diplomatic outreach over the past six months has shown he wants a better life for him and his people -- not a devastating war that would end his regime. But, as this week’s events have shown, the chances of miscalculation between the volatile leaders is high.

“If it’s not a diplomatic trick, they’re going to see mounting tensions,” Andrei Lankov, a historian at Kookmin University in Seoul, said of Trump’s move to cancel the summit. “If it’s a diplomatic trick, it still can go the wrong way. President Trump is playing a really dangerous game, and if it doesn’t work out, many people can die. Nothing nice about it.”

©2018 Bloomberg L.P.