Trump Always Wanted a Trade War—and Now He’s Got Several
The president’s seemingly arbitrary punishment of countries with wildly different practices suggests he was never much interested in negotiating.
When President Donald Trump announced Friday that he would slap billions of dollars’ worth of tariffs on certain Chinese goods, he opened up another front in what’s becoming a global trade war—one whose main aggressor is the United States. And the variety of Trump’s targets, starting with U.S. allies whose trade policies resemble those of the United States, and continuing with China, which is almost universally acknowledged to engage in unfair competitive practices, proves there’s something more going on here than a simple desire to punish bad actors and negotiate fairer deals. If that were the goal, China would not be treated similarly to Europe even though the two have vastly different approaches to trade. But Trump really does seem to believe that “trade wars are good, and easy to win.” His priority is not negotiating, but fighting.
First came Canada, the EU, and Mexico; now it’s China’s turn. Trump announced Friday long-anticipated levies of 25 percent on $50 billion of Chinese goods. In a statement, he said while he valued his friendship with Chinese President Xi Jinping, “trade between our nations … has been very unfair, for a very long time. This situation is no longer sustainable.” He said the tariffs were related to China’s theft of intellectual property and technology, as well as other unfair trade practices.
“These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs,” Trump said. “In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China.” China responded almost immediately, saying it will retaliate against the tariffs at the same scale.
Trade between the U.S. and China, the world’s largest and second-largest economies, respectively, amounted to about $648.5 billion in 2016, according to the U.S. Trade Representative. But the U.S. buys far more from China, mainly in the forms of consumer goods like electronics and household goods, than China buys from the U.S. This means that in 2016, the U.S. had a trade deficit with China of about $385 billion.
Deficits have long been an irritant for Trump, who views them as detrimental to the U.S. economy. He says he believes that reducing trade deficits—by increasing U.S. exports to other countries—would create more jobs at home, and that it’s tariffs that will ultimately force America’s trading partners to buy more American-made goods. But most mainstream economists from across the political spectrum say deficits do not matter as much as people think they do, and that deficits are based on a variety of factors including the value of a nation’s currency and how much its citizens save. Tariffs, though, result in trade wars that result in higher prices across the board for all consumers.
But where Trump is likely to have the support of economists as well as voters is his critique of China’s trade practices as unfair. China has been accused by the U.S. and others of, among other things, intellectual-property theft, dumping steel and other manufactured goods, tightly controlling its currency, and of giving its conglomerates unfair government support. All this, combined with a low-cost labor force, lax regulatory framework, and poor environmental standards, has occurred alongside the decline of U.S. manufacturing. Yet the causal relationship is not straightforward—many economists primarily blame automation, rather than competition from China or other low-wage countries, for the bulk of the loss of U.S. manufacturing jobs over time.
Reihan Salam argued in The Atlantic last week that the normalizing of trade relations between the U.S. and China had some detrimental effects on both countries. It was detrimental to the U.S. because there was indeed some loss of manufacturing jobs to China, and detrimental to China because the U.S. no longer raises human-rights concerns in the same way as it once did with what is essentially its largest trading partner and foreign creditor. In the pre-normalization era, the status of trade with China had to be renewed each year, ensuring that questions about the country’s human-rights record in Tibet and elsewhere were raised annually.
Singling out China’s trade practices and economic policies for criticism or punitive action might be one thing, but Trump has done the same for U.S. allies whose regulatory, labor, and environmental frameworks are at least as stringent as those in the U.S. Two weeks ago, he imposed tariffs of 25 percent tariffs on steel and 10 percent tariffs on aluminum imports from Canada, the EU, and Mexico, citing national-security concerns. They reacted angrily, and imposed retaliatory tariffs. Both Canada and the EU have complaints about China’s trade practices similar to those of the U.S., and they could have been reliable allies in persuading Beijing to alter its policies in order to make trade with it more balanced. (Mexico, fearing the demise of NAFTA, is meanwhile cozying up to China.)
The tariffs on China, as well as those on Europe, Canada, and Mexico, came after negotiations with officials from the economies at issue. But America’s trading partners have their own politics to consider, and the concessions Trump demanded were often simply too much.
Ultimately, Trump’s view of tariffs and his professed belief that trade wars “are good and easy to win” have less to do with any other country than how he views the U.S. economy and global trade. Even while a businessman, Trump viewed deficits as bad for the economy, free trade as detrimental to American workers, and multilateral trade agreements as weakening the U.S. position. As a politician, he has translated those beliefs into policy. Economists and others have said that the pursuit of these policies will have long-term adverse effects on the U.S. economy. But Trump promised tariffs and what he calls “fair trade” before we was elected and, despite the show of negotiations, imposed them when he didn’t get what he wanted.
The tariffs imposed Friday, as well as the ones levied two weeks ago, were preordained. It’s more than likely that the economic consequences will be, too.