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Your Guide to What Trump's Second Season Means Washington, Business and World
Donald Trump's “liberation day” of “mutual tariffs” on other parts of the world – perhaps the most eccentric trade policy proposal ever made has turned into a trade war with China after a fierce retreat from the market. This may have been (or may not be) intended from the start. So can Trump win this war with China? Certainly, does the US want to succeed in a broader rivalry with China, as it would be after Trump's second coming? The answer is “No.” This is not because China is invincible and far from it. This is because the United States, just like China, is discarding all the assets needed to maintain its global position against determined forces.
“The trade war can be won in good condition,” Trump posted in 2018. As a general suggestion, this is wrong. A trade war hurts both sides. You could potentially reach a trade that would be better than before. Perhaps one of the deals will be better than before and the other will get worse. The latter kind of deal is something Trump would likely want. The United States will win. China will lose.
At the moment, the US imposes a 145% tariff on Chinese imports, while China imposes a 125% tariff on the US. China has also restricted the export of “rare earth” to the United States. These are very expensive, and are practically prohibited and transactional barriers. This looks like a “Mexican standoff,” but neither can win, even between two superpowers.
The US plan (if any) is given to understand that it is to “persuade” it to impose heavy barriers to imports from China in return for a favorable deal with the US (and possibly in other areas such as security). Is this result plausible? no.
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One reason is that China also has powerful cards. Many important authority already trades with China more than the US. These include Australia, Brazil, India, Indonesia, Japan and South Korea. Yes, the US is a more important export market in many important countries than China. However, China is also an important market for many people. Furthermore, China is an essential source of imports, many of which are not easily exchanged. After all, imports are the purpose of trade.
In particular, the United States is no longer trustworthy. “Transactions” The US is always looking for better transactions. There is no sane country to stake its future on such partners, especially against China. Trump's treatment of Canada was a critical moment. Canadians responded by re-election of liberals. Will Trump be learning now? Can the leopard change his spot? This is him. He is also the man elected twice by US voters. Furthermore, destruction with China is at risk. China will never forget and rarely forgive.
In particular, China believes that its people can suffer more economically painful than Americans. Furthermore, for that, the trade war is primarily a demand shock, and for the US it is primarily a supply shock. It's easier to replace lost demand than lack of supply.
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In short, the US will not get the deal it clearly seeks and the victory over China it wants. My assumption is that once this becomes clear to the White House, Trump will at least partially retreat from his trade war, declare victory and move in other directions.
But that doesn't change the reality that the US is actually competing with China for its global influence. Unfortunately, this is not us in the US that many people want to do well with this.
Plus, Trump's US isn't going well. Its population is one quarter of China's population. Its economy is almost the same size, as it is much more productive. Its influence, cultural, intellectual and political, is much greater than that of China, as its ideals and ideas are more appealing. The US has been able to create a strong partnership with like-minded countries that will strengthen this impact. In short, it is inherited and blessed with enormous assets.
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Now, think about what's going on under the Trump administration. An attempt to turn the rule of law into a tool of vengeance. Dismantling of the US government; light emptying against the laws that are the basis of legal government. Attacks on scientific research and the independence of great American universities. War on reliable statistics. Even if hostility towards immigration (and not just illegal) was the foundation of American success for all generations. A complete denial of medicine and climate science. A complete rejection of the most basic ideas in the economics of trade. It takes precedence over the equality (and far worse) of Russian tyrant Vladimir Putin, or Vorodimia Zelensky, the Democratic leader of Ukrainians. and an open light empty against an array of cooperation and an array of cooperative institutions built in the US. All this is in the hands of political movements who embraced the January 2021 rebellion.
Yes, the global economic order needed to be improved. It's overwhelming when China shifts towards consumer-driven growth. It is also clear that many reforms are needed within the US. But what's happening now is not reform, but the ruin of the foundations of American success at home and abroad. It would be difficult to reverse the damage. It is impossible for people to forget who and what caused it.
The United States, seeking to replace the rule of law and the constitution with corrupt Croney capitalism, is no better than China. The purely transactional US receives no heartfelt support from its allies. The world needs the United States to compete and cooperate with China. Alas, neither of these us will work.
Martin.wolf@ft.com
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