The global trade war is coming

Nobel Prize Winner in EconomicsKrugmanmeans, globaltrade warA storm is coming, even if the president of the United States is not the culprittrumpbut Trump’s four major weaknesses could make the United States lose the trade war.

Kluman pointed out in a column in the New York Times that mainland China is the one involved in this global trade war, because as the world’s economic power, it is irresponsible.

BeijingPolicy fallacies are fueling the global trade war

The era of rapid economic growth in mainland China is a thing of the past, investment-led growth is now outdated, and the economic leader has also appeared unwilling to accept the t -position and change the economic system from one based on investment to one focused on consumption. Beijing’s stimulus measures have again focused on expanding production capacity rather than empowering consumers to put that capacity to good use. As a result, the production capacity is too large for the domestic demand market to digest.

To solve the problem, the obvious way is to expand exports and maintain a large trade surplus to allow mainland China’s economy to continue to expand. How big? Mainland China’s trade exceeds nearly US$1 trillion, and the trend is still rising. (The actual number could be higher, as there is a suspicion of playing numbers games to make the remainder appear smaller.)

However, the rest of the world will not passively accept a trade deficit as large as mainland China. The lesson the world learned from the “China shock” of the 2000s is that regardless of the real benefits of free trade, increasing imports will cause undue harm to domestic workers and communities over time. In addition, Beijing is an authoritarian regime that lacks democratic values, and allowing it to control strategically important industries also poses unacceptable risks.

This is exactly why the Biden administration is still taking a hard line against Beijing, trying to block mainland China’s progress in modern technology by continuing the taxes enacted during Trump’s term. This is also the reason why the EU imposes high tariffs on electric vehicles made in mainland China. This may just be the beginning of the expansion of trade disputes.

The four fatal flaws in Trump’s trade war

So, the trade war is looming, and from some perspectives it may have already begun. Trump 2.0 will lead the United States to fight this trade war.

Ignorance: Even as businesses across the country prepare to raise prices in response to the tariffs, Trump insists the tariffs won’t hurt American consumers. It can be seen that neither Trump himself nor those who advise him understand how global trade works. In a time of trade conflict, this is never a good thing.

Out of focus: Trump plans to implement comprehensive tariffs, not just against mainland China He will push up the costs of many American companies and attack American allies at a time when international cooperation is urgently needed.

Appointing cronies: The US president has broad discretion to exempt certain companies from tariffs. During Trump’s first term, that immunity went disproportionately to companies with close political ties to the Republican Party. It would be naive to think that this situation will not happen again or get worse in the era of Trump 2.0.

Gullible: In Trump’s first term, he stopped raising tariffs after signing what he called a “historic trade deal.” According to this agreement, mainland China agreed to buy a total of US$200 billion worth of US goods. How much did it buy? Didn’t buy anything.

Kluman concluded that China’s attempt to use exports to solve economic problems caused by policy mistakes has led to serious trade disputes. But the United States has elected a leader who may be the worst in dealing with trade disputes.