In spite of widespread disbelief, Donald Trump has unleashed a trade war by ordering tariffs left, right and center. Or rather, a phoney war, one whose goals change depending on the designated enemy, punctuated by blackmail, brutal about-faces and grace periods of uncertain length. A sense of chaos has been setting in. One man's decisions seem to have overridden all economic rationality. Both the methods used and the justifications have raised questions.
On Tuesday, March 4, 25% tariffs on Canadian and Mexican exports to the United States were due to come into force, but their implementation was postponed until April 2. That was their second postponement, after the one in February. Products coming from China are subject to a 20% tariff rate, until further notice, while the European Union still doesn't know what rate will be applied to it, but its 27 member states know that it's only a matter of time. Agriculture, steel and aluminum will be affected, not to mention the promised "reciprocal tariffs," the ins and outs of which are still unknown.
It's going to be fine, the US president has said, foreseeing "a little disturbance, but we're OK with that. It won't be much." This wishful thinking isn't fooling anyone. Between the expected inflation, Wall Street's dip, the disruption of production lines, the retaliatory measures against the US and waning US household confidence, the damage is already done.
Shooting itself in the foot
Ignoring the warnings issued by most economists and international institutions, Trump has been stubbornly pursuing a trade war that was described by The Wall Street Journal, on January 31, as "the dumbest in history." "Our deep concern is that this could be the start of a downward spiral that puts us in 1930s trade-war territory," warned Andrew Wilson, deputy secretary general of the International Chamber of Commerce, which represents thousands of businesses across 130 countries.
The former real estate developer has been acting as if he wants to raise rents on Manhattan condominiums to improve his return on investment. Yet international trade is neither a game of Monopoly nor a zero-sum game, in which one person's loss leads to another's gain. Under the guise of a "revolution of common sense," intended to bring back factories and jobs, the US has been shooting itself in the foot, and the whole planet must be prepared to pay the price for this act of self-mutilation.
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