Costly, fruitless and open-ended, Trump could be starting something he won't be able to finishby Adam Posen / March 20, 2018 / Leave a comment
Published in April 2018 issue of Prospect Magazine
Trade conflict is recurrent, ubiquitous, and occasionally quite contentious. Yet, for all the political attention given, no major economic problems have arisen as a result of these conflicts in over 70 years—let alone anyone resorting to military force to settle them.
The Trump administration’s trade threats and tariff actions to date, however, are the most dangerous measures since the United States and its allies set up the international economic system in the 1940s. Several factors distinguish a trade war from mere friction. Governments start viewing trade as a conflict between nations, rather than a beneficial process to manage. They assume that bullying is preferable to multilateral rules. They put a premium on doing damage rather than deterring bad behaviour. Ultimately, they break down the separation between commerce and national security, raising the risk of significant escalation of conflict.
Trade war feeding real war is precisely what Franklin Roosevelt and Cordell Hull, his Secretary of State, had intended the postwar trading system to preclude, given fresh memories of how German, Japanese (and British) economic imperialism in the 1930s had fuelled military rivalry. Trump and his remaining economic advisers repudiate this arrangement. They are under the delusion that the US has been exploited by the rules-based system that it created. Moreover, they apparently think that every government will give in to US interests. That delusional world view is about to be proved wrong. The process of demonstrating it will be costly for people around the world, including in the US.
Steel and aluminium tariffs are of minimal economic im…