Trump’s Trade Wars

Is the president of the United States, Donald Trump, what the Maoists used to call a paper tiger, or do we have to take his loud threats seriously? This question has become more important in relation to the North Korean nuclear issue. But after Trump’s mostly amiable 12-day trip to Asia, the fears of a conflict in the Korean Peninsula have diminished somewhat.

Meanwhile, that same trip raised another threat: In the second year of his administration, Trump will focus his attention on trade, and the prospect of additional trade wars will increase substantially.

Last year, Trump complained repeatedly about the unfair trade practices of other countries, as he did during the 2016 presidential campaign; but he has done little to put his words into action. This lack of action is understandable. Trump relies on China – one of the United States’ main trading partners – to put pressure on the North Korean regime, while U.S. businesses have been lobbying intensively against any measures that could restrain trade. Even so, we shouldn’t expect Trump’s apparent self-restraint to last for long. The logic of that ideology holds that trade deficits are proof of unfair practices by other countries, and that accordingly, they must be fought with tough, decisive action. Moreover, Trump has a compelling political interest in keeping the support of his most loyal backers. Second to Twitter, Trump’s rhetoric about trade is his most powerful weapon.

Until now, Trump has wanted to postpone the trade question until the proposed Republican tax reform legislation advances in Congress. He doesn’t want to run the risk of disrupting the last chance he and his party have of assuring themselves a real legislative victory this year.

Once tax reform legislation is off the table, Trump will want to demonstrate that he means what he says about trade.

Some in Trump’s cabinet might resist efforts to put this catchphrase into practice with respect to the matters they oversee. They all agree that the large bilateral trade deficits the U.S. has with countries like China, Japan, Germany and Mexico are proof that competitors are making fools out of them. Trump and his trade advisers believe that by reducing or even eliminating those trade deficits, they can create well-paying jobs for U.S. workers. Trump made his position clear in a speech at the Asia Pacific Economic Cooperation meeting in Da Nang, Vietnam, on Nov. 10. “We are not going to let the United States be taken advantage of anymore,” he said.

But what concrete actions will Trump really take? As of now, he has withdrawn from the 12-country Trans-Pacific Partnership, and has started negotiations with Mexico and Canada to revise the North American Free Trade Agreement. However, it is to be hoped that Trump will transform rhetoric into action on two principal fronts. The first is China, which Trump has identified as the country that most takes advantage of the U.S. in trade. Trump will probably impose anti-dumping measures on the Chinese steel industry which, as he sees it, is selling its products below cost. And he will probably launch a wide-ranging attack on intellectual property violations in China, which will lead to retaliation on China’s part.

The other principal front for Trump is the World Trade Organization. He has formally declared that the WTO system of conflict resolution is detrimental to the U.S.