Donald Trump sees his trade war as a show of strength. In fact, it’s the opposite | Larry Elliott
R.The shots that were opened have been separated in a Trade war. Multiple parties on their last legs. Globalization is retracted. He is less than a month since Donald Trump returned to the White House and is a man in a hurry.
Since I swore as president, Trump has been busy with the world order. Its decision using the customs tariff to reduce the American trade deficit has captured most of the headlines, but not only half of the story. He has withdraw From the World Health Organization and the destruction of the American aid department. There is a hadith in Washington that it You may withdraw The United States from the World Bank – a body that the United States helped create at the end of World War II.
Even if it is decorated with such a sharp step, the rules of the game change. For decades, the American trade deficit was decisive to the global economic model. Large exporting countries such as China and Germany have sold much more goods to the United States than they were imported, but have used their huge trade surplus to buy American origins such as stocks, bonds and property. The flow of capital to the United States is supporting the dollar, which has been unparalleled as a world reserve currency.
Trump says this must change and prepare to use the customs tariff to reduce the American trade deficit by cutting imports. He sees this as evidence of the power of the United States, although it is actually a sign of Washington’s weak feeling of the growing economic power of China and the threat that constitutes the dominance of the United States.
Nothing of what Trump has yet to be a surprise. After carrying a protective ticket, “America first”, he threw those who voted in his favor. High approval categories, with 70 % in A. A modern poll He says he is doing what he promised before his election last November.
It is still the first days. The same poll found that the Americans believe that Trump’s policies are more likely to raise food prices more than they decrease – and that this anxiety has something well. There is a clear risk that the commercial policy of the new administration will lead to high import prices, high inflation and high interest rates. Jerome Powell, President of the US Central Bank, clearly In any rush To reduce borrowing costs.
Beware of Powell for interest rate discounts is only an example of the unintended consequence law. Trump wants the dollar to remain a favorite global currency, but inflation in the United States will encourage the use of encryption coins such as bitcoin. It is likely to use definitions, reduce aid, and clear hatred of multilateral institutions, countries in Asia, Africa and South America more open to Beijing initiatives.
In a sense, Trump is just speeding up the trend. The two countries have created commercial barriers quietly since the 2008 global financial crisis. For years, manufacturing functions in the United States have lost the result of Beijing’s subsidies to its exporters. If there is a golden age of pluralism, it has ended a long time ago.
Andrew Billy, the governor of the Bank of England, also also He said in a speech Last month, only when things become very bad – as I did in 2008 – there is ready to take a decisive collective action. “Weaknesses grow, and the necessary solutions are global, but they are not large enough to prepare multiple crises. We don’t want to happen.”
Of course, it can easily. Economists in the free market argue that countries whose exports are affected by Trump’s definitions should turn the other cheek and do nothing. This is because the customs tariff represents a tax on American companies and consumers, who will pay higher prices as a result of the luxury of import. However – regardless of the United Kingdom, which is keen on that Keep Trump’s good books This is not the way the real world works. In practice, it is likely to be an eye of the eye and the teeth. Emmanuel Macron and Jinping have explained that they were unwilling to pay by Trump.
A complete commercial war may still be avoided. Although Trump announced a 25 % tariff for everyone Steel and aluminum imports Earlier this week, these two goods form a small part of global trade only. More importantly, it is what happens after that-in particular whether Trump imposes a global tariff on all goods coming to the United States, or operating on the basis of each country separately.
The last approach is proportional to what we know about Trump: that is, he is ready to use the threat of definitions to cut deals. What is more, if the effect of the customs tariff raises fears of permanently high inflation, then this will have repercussions in the financial markets. The low price of acute stocks in the United States is not part of the president’s plan.
But the idea that everything will end well looks optimistic. Trump’s actions are the most important protectionist work since the United States Smoot-Hawley tariff From 1930 it was paid to in response to American trading partners during the Great Depression.
The global growth of a series of shocks in the past five years – a pandemic, a war in Ukraine and the return of inflation. There was a lot of speculation about what the next bump might be on the way. Waiting has ended now.
