Why Trade War Is Possible

Donald Trump is a developer, a specialist in making “deals” in which one side gains by pushing the other side against the wall.

I may be a bit boring, but I return to the issue of the trade war between the U.S. and China. It is true that there is a temporary ceasefire. Presidents Donald Trump and Xi Jinping spoke to each other at the Group of 20 summit of leading and emerging market nations, and both sides announced that they have not yet introduced new tariff increases and that the U.S. has eased restrictions on the sale of technology to the Chinese telecom giant Huawei, but there is no breakthrough either. Trade war is still a threat, and its uncontrolled escalation may occur at any time, plunging the global economy into recession and the world’s politics into a deep crisis.

Why is the outbreak of a trade war still possible? First of all, because doesn’t seem to consider it a bad thing at all. To the contrary, according to the doctrine of Prussian General Carl von Clausewitz, Trump seems to consider trade war to be a “continuation of economic policy by other means.” Even as a presidential candidate, he suggested withdrawing from free trade agreements and imposing criminal duties on imports from Mexico and China. Later as president, Trump actually began to introduce such tariffs and to threaten his trade partners with using them.

Second, trade war is still possible because Trump does not consider free trade to be a win-win situation for both parties. He is a developer, a specialist in making single “deals” where one side gains only when the other side is pressed against the wall. In his simple vision of the economy as a big business, we gain if we sell something and we lose if we have to buy something from others. And if, God forbid, we end up with a deficit, it means we’ve been fooled. Economists know that’s not true. But politics are governed by its own laws.

Third, trade war is possible because Trump apparently feels that his voters like this policy. He promised them that, by using America’s economic power, he would put smart Asians and Europeans on the line and force them to relocate their factories and jobs to the United States. Of course, this won’t work. Even if the factories returned to the U.S., they would be operated by robots and not by workers. However, a trade war can always be conjured up. As in 1904, Tsar Nicholas II deliberately provoked a “small, victorious war” with Japan to increase his popularity, starting the process of Russia’s collapse.

Why is it so dangerous? Almost 80 years ago, at a meeting between Franklin Roosevelt and Winston Churchill aboard the battleship Prince of Wales dedicated to the postwar world order, the U.S. president harshly attacked British protectionist trade agreements. “It’s because of them that the people of India and Africa, of all the colonial Near East and Far East, are still as backward as they are,” Roosevelt said.

The equality of nations requires full freedom of competitive trade. And for the next 75 years after that meeting between Roosevelt and Churchill, the U.S. considered free trade to be the best recipe for global economic development, support for democracy and for the peaceful coexistence of nations. What will happen to the world if the chief advocate of free trade and free markets turns into free trade and free markets’ enemy? We really do not know.