Let’s prepare for Trump’s trade war with China

by Fabius Maximus

Summary: Trump has brought us to the brink of a trade war. Before we take the plunge, let’s remember what we are risking – and why.

“If the tension is not managed intelligently and creatively, the danger is that the domestic consensus in favor of open markets will ultimately erode to the point where a generalized resurgence of protectionism becomes a serious possibility.”
— Dani Rodrik (professor of economics at Harvard) in Has Globalization Gone Too Far?(1997).

World trade

Trade wars have much in common with real wars. They are born in hubris and ruled by the unexpected. Trade wars between great powers are MAD – mutual assured destruction. The only way to win is not to play. There are other and better methods to resolve conflicts.

Anyone clearly seeing Trump knows that he is a clown. Starting a trade war with China would be reckless, showing deep ignorance of how the world works. It would be the defining point of his administration.

Wars and trade conflicts are creatures of a President’s will. Sometimes Congress rubber-stamps his decision, often on the basis of lies. Sometimes Congress grants the President broad and vague authority that allows him to start wars at will. Trade wars are the latter. Either way, they show the bizarrely massive discretionary power we grant our presidents. Unfortunately, we often elect presidents unworthy of great power.

We have been lucky. Our bad choices have not sunk us. Of course, there is always tomorrow. Trump appears determined to start a trade war with China, ignorant of the risks – encouraged by his belligerent advisers.

Hail to the Chief.

Crazy clown - Dreamstime_8055059
ID 8055059 © Martin Applegate | Dreamstime.

The far right hates the treaties that protect us

Despite Trump’s faux populism during the election – arousing hope for change – he has governed as a bog standard far-right republican. The far-right hates the network of treaties that has helped keep America safe and prosperous. Past Republican presidents resisted pressure from their extremists. Trump has embraced them. See the list of treaties and agreements he has cancelled or withdrawn us from. Add to that the UN Arms Trade treaty he withdrew us from in April.

For generations the Right has sought to return us to the pre-WWII world. Nineteen of them voted against the Nuclear Test Ban Treaty which stopped the above ground nuclear testing that was blanketing the world with radioactive fallout. On 8 December 1987 Reagan and Mikhail Gorbachev signed the Intermediate-Range Nuclear Forces Treaty. This marked the beginning of the end to the cold war – and a large step towards lifting the threat of global annihilation. Conservatives went berserk.

They hate the treaties that kept us safe. They hate the trade treaties that produced much of our post-WWII prosperity. Eventually they will destroy both our safety and prosperity.

But the stock market isn’t scared!

Ignore the myths. Financial markets are just mirrors of investors’ thinking. They show no special prescience. For example, investors ignored the evidence of WWI’s approach until the armies moved (see the amazing details).

Watch the clouds gather over the global economy

“Do I disapprove of Trump’s trade methods? I don’t see any method.”
— Tweet by Paul Krugman.

Slowly the clouds gather. Nobody panics because few can imagine that Trump would be so stupid.

Especially see the articles by economist Brad Setser at the CFR.

 

 

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