Voters elected Donald Trump in part because they wanted a fighter. But increasingly it seems that in international trade, he’s good at shaking his fist for the cameras but utterly outclassed when he steps into the boxing ring.
Indeed, Trump may be more dangerous to his own side of a trade war than to the other guy.
Even after Trump’s climb-down — declaring a 90-day pause on many of the “Liberation Day” levies that sent the stock market reeling — America’s tariff rates remain the highest in more than 90 years. They amount to an enormous tax hike on consumers, with researchers previously estimating that they might add something like $1,700 in costs per year to a middle-income American family. They’re a reason many economists fear that the United States is slipping into a recession.
The most heated trade war is with China, and it’s there that I fear Trump has particularly miscalculated. He seems to be waiting for President Xi Jinping to cry uncle and demand relief, but that’s unlikely; instead, it may be the United States that will be most desperate to end the trade conflict.
China does have serious internal economic challenges, including widespread underemployment and a deflationary loop with no end in sight. The trade war could cost China millions of jobs, and that raises some risks of political instability.
Yet it’s also true that China has prepared for this trade war. I’m guessing some Chinese factories are already printing “Made in Vietnam” labels and preparing to ship goods through third countries. And China will fight with weapons that go far beyond tariffs.
China buys agricultural products and airplanes from America, and it can almost certainly get what it needs elsewhere. But where is the United States going to get rare-earth minerals, essential for American industry and the military-industrial base?
