Some of Donald Trump’s tweets are more important than others. A year and a half ago, the president declared that the United States is “losing many billions of dollars” on trade, which reflected a degree of confusion about how the economy works. The differences between trade deficits and “losing money” matter – and are obvious to those with a basic familiarity with the issue.
But Trump quickly added on March 2, 2018, “[T]rade wars are good, and easy to win.”
I wonder if he still believes that.
In the wake of the Republican president’s decision last week to expand tariffs on Chinese imports – effectively reaching the point at which all goods from China will be subjected to Trump’s taxes – CNBC reported yesterday that officials in Beijing confirmed that China, one of the world’s largest consumers of American agricultural products, is “pulling out of U.S. agriculture as a weapon in the ongoing trade war.”
China also allowed its currency to slide yesterday, prompting the White House to declare China a currency manipulator, further escalating tensions.
Meanwhile, on Wall Street – which Trump monitors “obsessively” – the Dow Jones has dropped nearly 1,500 points since last Tuesday. It’s now lower than it was when the Republican initiated the trade war in early 2018.
Slate’s Jordan Weissmann explained yesterday that one of the things that has people so nervous is the fact that there’s “no obvious way this conflict can be resolved.”
Trump reportedly decided to impose tariffs in spite of the fact that all but one of his advisers opposed them. (The exception was Peter Navarro, the White House’s anti-China trade adviser.) He is hellbent on “winning,” whatever that means, and appears convinced, despite all available evidence thus far, that he can eventually grind the Chinese down through sheer stubbornness.
But Beijing is standing firm, because it is determined to project strength both at home and abroad, and backing down now would instead show vulnerability.
By all appearances, Trump thought he could simply bully China into submission. It’s not working.
Part of this is clearly an extension of a deeply flawed strategy, but I continue to believe another relevant angle is the American president’s confusion about what trade is.
Late last week, for example, in reference to China, easily the United States’ largest trading partner, Trump told reporters, “If they don’t want to trade with us anymore, that would be fine with me. It would save a lot of money.”
No, it wouldn’t. That’s bonkers. Every day, American consumers buy less-expensive products because they’re made in China, just as American exporters, every day, sell products to the huge Chinese market.
The idea that the United States would “save a lot of money” by ending trade with China is as foolish as arguing that China is paying us billions of dollars by way of Trump’s tariffs – a bogus claim the American president continues to repeat, convinced of its accuracy.
It’s one thing for Trump to struggle with a trade war he thought would be “easy” to win; it’s something else for Trump to struggle with a trade war because he’s not altogether sure how trade works.