Trump Can’t Win a Trade War with China

The U.S. president may be pursuing legitimate interests with his threats; however, his theory is fundamentally false – and his opponent is too powerful.

The American president has reached a new level of escalation in the trade war of words with China. Now he is threatening punitive tariffs on Chinese goods worth $100 billion. If the Chinese government were to pay him back in kind, which one must expect given the state of affairs, any and all U.S. imports into China would be affected. The “tit for tat” between Washington and Beijing is becoming increasingly tougher.

Trump is entering a “minefield” with his threats, commented a conservative Republican senator. The figure of speech, borrowed from the military, fits. Trump’s march into a trade war is, in many ways, reminiscent of military adventures by former presidents, who got their country into a no-win situation with misguided strategy. Iraq is the most recent example of this; Vietnam, the most important. The analogy is also correct on other points. Accordingly, there was a thoroughly comprehensible motive when the involvement in Vietnam began under John F. Kennedy: An allied country should be protected from brutal communist guerillas. In fact, however, the country was not protected by the war, but instead destroyed, and the American public was led down the garden path.*

There is also a legitimate motive in the trade war with China: to move the country toward conforming with economic policy practices. Today’s China is a trade superpower, but it still sometimes behaves like a developing nation – for example, with respect to intellectual property. In this, the Europeans have interests that are quite similar to those of the United States. However, the question is: Does Trump have a strategy for his objective? No one knows. As a result, the stock markets and the international community have, meanwhile, become nervous. Consequently, many fear for the recovery of the world economy.

What one does know is that Trump has operated under false theory and archaic methods – tariffs and verbal assaults on trade partners. The president and his ill-fated economic adviser Peter Navarro leave no doubt about the theory. In their fantasy world, all countries that sell more to America than they purchase are bad. According to that idea, trade is a zero-sum game: If the U.S. has a deficit in its trade balance, then that can only be due to unfair practices by other countries. The simple message that a considerable part of worldwide prosperity is based on trade profits no longer gets through to the part of the American public that is cheering on the president.

Also part of the theory is the conviction that trade wars are “good and easy to win.” With some cynicism, one could say that if the U.S. attacks a small country like South Korea in a trade conflict, then the statement about being “good and easy to win” may even be correct. China, however, is not a small country, but instead, the second largest national economy on earth and Washington’s largest creditor. A trade war with China is not winnable, if one can even define what the words “victory” and “defeat” mean in such a case. At any rate, Trump will not achieve an evened-out trade balance in this way. That would only be possible if the U.S. as a nation could save considerably more, and/or invest and consume less, but the president isn’t even striving for that. Instead, he is leading his country into a minefield that no one knows.

*Editor’s note: To ‘lead down the garden path’ is an idiom meaning to deceive or mislead someone.