On Thursday, Donald Trump announced that he intended to impose stiff tariffs on steel and aluminum imports, raising fears of a new trade war and sending stocks tumbling for the day. This morning, he woke up and tried to…do some damage control? Rally his base? Assuage the fears of anxious investors? I don’t know. Anyway, he tweeted.
This is one of those presidential missives that makes you want to stare silently into the bottom of a whiskey glass for a while. The phrase “trade wars are good, and easy to win” is both terrifying and wrong. It suggests Trump may actually want countries like China and Mexico to escalate the conflict by retaliating against us, since in his mind, trading less with them will bring down our trade deficit through the simple power of arithmetic.
That’s not actually how the world works. If the U.S. imports less from China, for instance, we may simply end up importing more from Vietnam. Meanwhile, American exporters that do business in the People’s Republic could end up losing sales, while American manufacturers could find their Asian supply chains scrambled. There are times when narrowly targeted tariffs may be necessary or useful; as I wrote yesterday, President Obama’s own attempts to stop unfair dumping by Chinese steel companies seem to have worked reasonably well. But broad, tit-for-tat trade wars are a mess that inflict damage on everybody involved.
And the more countries America picks a fight with, the more we have to lose. George W. Bush learned this when he imposed a tariff on steel from Europe, Asia, and South America in 2002. He was forced to drop the duty 20 months later, when it become clear that our trade partners were going to strike back. Here’s how the Washington Post reported it at the time:
European countries had vowed to respond to the tariffs, which were ruled illegal by the World Trade Organization, by imposing sanctions on up to $2.2 billion in exports from the United States, beginning as soon as Dec. 15. Japan issued a similar threat Wednesday. The sources said Bush’s aides concluded they could not run the risk that the European Union would carry out its threat to impose sanctions on orange juice and other citrus products from Florida, motorcycles, farm machinery, textiles, shoes, and other products.
Europe and our other trade partners will almost certainly run the same playbook of putting tariffs on politically important exports like OJ this time around. But Trump does not appear to have looked that far ahead. He’s too busy thinking on the level of an all caps tweet.
Tell that to Florida’s orange growers.