America’s Suicide: Trump’s Trade War*

The United States will lose the trade war that Donald Trump has declared. The world will build a new system of economic cooperation that will push the U.S. to the sidelines.

The issue of Ukraine alone should have prompted the president to consider Washington’s limited capabilities. After all, Donald Trump announced he would end the war within a day, but two and a half months after he took power, it has only intensified.

The White House cannot curb Vladimir Putin’s imperial ambitions, stifle the Ukrainians’ heroic resistance, nor, most surprisingly, prevent a united Europe from adopting its own independent policy to support Kyiv.

Now, America’s powerlessness will come to light on an even greater scale. By announcing virtually universal punitive tariffs on Wednesday, Trump effectively dismantled the global system of economic cooperation that the U.S. has spent the last 80 years building. It was also its biggest beneficiary, in particular due to the dollar’s unique role as the world’s reserve currency.

Even as the U.S. steadily lost its dominant position in the global economy to emerging powers, especially China, the established economic order held firm because it was built on clearly defined rules, without which businesses cannot function.

A United Europe Will Build Its Own System of International Economic Cooperation

Trump’s logic put an end to it once and for all. The president presented a list of alleged protective tariffs imposed by other countries, which is a complete fantasy. In it, he included alleged exchange rate manipulation, fees, or even EU VAT, which, for reasons unknown, would be particularly harmful to American business people.

How can entrepreneurs plan long-term development strategies if the rules that determine the profitability of their businesses are implemented this way? As Trump himself announced, these rates can be changed at any moment, depending on whether foreign governments comply with Washington’s dictates.

From Brussels to Beijing, from Tokyo to Seoul, you can hear the announcement of the introduction of retaliatory mirror tariffs on American imports. As a result, an uncontrolled global trade war is looming on the horizon. It will tear apart the very fabric of the global economy, leading the world into recession. But its effects will spill over beyond business, starting with America itself.

Trump is firmly convinced that, through radical protectionism, he will bring reindustrialize the country. “’Tariffs’ is the most beautiful word,” he says, because he believes they will give jobs and dignity back to his predominantly white and less educated constituents, who are at risk of further poverty.

However, economists agree that the outcome will be different. It’s American consumers, not foreign businesses, who will bear the cost of the new tariffs. Foreign products will be more expensive because it is impossible to find their American substitutes easily. Walmart, filled with Chinese goods, is representative of this. The American poor will continue to shop there because they can’t go anywhere else. They will just spend more. They will end up buying less out of necessity, which will in turn undermine the country’s economic growth, all the more so since higher inflation will also mean higher borrowing costs. The collapse of the U.S. stock market already shows the direction in which this is going. The disappointment of Trump’s supporters will drive the president to double down on his radicalism. There is little hope for agreement between the White House, the EU, China and Japan.

But a more constructive scenario is also possible: the search for an alternative trading system to the one that America is currently dismantling. The EU is trying to pave one of the new ways. With renewed vigor, it has begun to negotiate bilateral agreements on liberalizing the exchange of goods and services.

One example is the agreement between Brussels and Seoul on the exchange of digital services. Another is the unblocking, after two decades of talks, of a free trade agreement between the EU and Mercosur: Brazil, Argentina, Paraguay, Uruguay and Bolivia. But yet another agreement may prove to be a real breakthrough — the one between the EU and China. It would be possible if Beijing stopped violating World Trade Organization rules when it comes to intellectual property rights, state subsidies to enterprises, and social and environmental labor standards. We cannot rule out that, pressured by Trump’s policies, Xi Jinping would accept such a deal.

In that case, a model of global economic cooperation built around the EU would encompass a disproportionately larger part of the global economy than that which belongs to the U.S. today. In other words, for the first time since World War II, America would be on the defensive and would have to adjust to the rules set by others.

Mexico Could Be Hit the Hardest by the New Tariffs. America Would Feel Its Economic Collapse Strongly

This is all the more likely as other initiatives to rescue international economic cooperation have emerged outside the EU. One of them is the Trans-Pacific Partnership, a project paradoxically promoted by the U.S., but from which, thanks to Trump, Washington withdrew.

Today, however, it unites countries that make up as much as 22% of global imports, from Australia to Canada and Japan. If the EU, with its 12% of imports, were to join, a real superpower would emerge that would not only exclude the U.S., but China.

In the short term, however, it is in relations with Mexico where America’s fate is most decisively shaped. We are talking about the largest U.S. trading partner, which sends as much as 85% of its exports to its northern neighbor. If this is no longer possible, the Mexican economy will be brought to its knees, and desperate Mexicans will again start massively betting on illegal immigration to the U.S. Then it may turn out that Trump is not able to control that either. And his most important election promise will be broken.

*Editor’s note: The original Polish version of this article is available with a paid subscription.