Donald Trump’s trade war is not going as planned
Harley-Davidson motorcycle engines are assembled at the company's Powertrain Operations plant in Wisconsin in June. Credit: Getty Images / Scott Olson
President Donald Trump has told us that “trade wars are good, and easy to win.” He seems to have thought that just threatening to impose tariffs would bring other countries to their knees, since those countries need access to the vast U.S. market.
But his global trade war isn’t going as planned. The threat and then the imposition of tariffs on goods that the U.S. imports — from China, Canada, Mexico and the countries of the European Union — have not induced those countries to capitulate to U.S. demands. Instead, the countries have imposed retaliatory tariffs on hundreds of goods that U.S. farmers and manufacturers sell abroad, from apples, soybeans and pork to whiskey, electric cars and car parts.
The tariffs and counter-tariffs have started to hurt U.S. businesses and workers — as well as consumers. And there is no end in sight to the further escalation of these trade wars.
Trump’s trade wars are not working because the administration has failed the most basic test of a good strategy — setting priorities and crafting a policy that go after important goals first.
The United States has legitimate concerns about trade imbalances and the persistence of non-tariff barriers to exporting U.S. goods to Canada, Mexico, Japan, South Korea and the EU. But a much more fundamental challenge to America comes from China.
From the theft of U.S. intellectual property to its policy to make China a leader in artificial intelligence and disruptive cyber technology, Chinese policies and practices are a challenge to U.S. interests. And maintaining the trade imbalance by restricting imports of currently superior U.S. products, which Chinese firms and consumers would like to buy, is part of the Chinese policy.
Yet like a dangerously overconfident military leader, Trump has started trade wars not just against China but also U.S. allies. His decision to strike economically at many countries at once has squandered valuable leverage he might have had on China to negotiate a fairer trade relationship. Facing new barriers to entry in the United States, China can seek out alternative markets in Canada, Germany or Mexico. Indeed, China is in the midst of a major initiative to open markets around the world for Chinese goods and services, which has included reaching out to the EU and other U.S. trade partners about new free trade deals.
Trump’s trade-war strategy also fails to take into account a key domestic difference between China and America. Americans who suffer from his multiple trade wars can, in 2018 or in 2020, vote Republicans out of office. Chinese consumers, workers and firms, hurt in a trade war with America, cannot hold their national leaders accountable in free and open elections. This difference in accountability means the Chinese government can hold out in a trade war for a long time.
To overcome this disadvantage and get China to change its ways, the United States needs to form a large coalition of trading nations, including Mexico, Canada and Europe. Many of those countries have similar concerns about China’s trade and industrial policies. But Trump’s trade wars against them preclude forming such a coalition so long as we stay the current course, and is likely to lead to high costs for America and few gains in our economic relationship with China.
The truth is trade wars are costly for all, and hard to win.
Joseph Grieco is a professor of political science at Duke University. Tim Büthe is chair for international relations at the Technical University of Munich, Germany.
