I see that Trump seems to be claiming victory in his trade war based on a deal with the European Union to negotiate lower tariffs. I want to take some credit for calling this one based on an oped I wrote two weeks ago, but couldn't get printed. Here's the version I drafted on July 12th.
The End Game in Donald Trump’s Trade War
Like many economists, I have been puzzled over the likely endgame in the trade war that Donald Trump has initiated with most of our major trading partners. He has escalated his rhetoric and put together a large list of imports to be hit with tariffs. His demands are vague and continually shifting. This doesn’t look like the way to win a trade war.
But then I remembered we are talking about reality TV show host Donald Trump. Winning a trade war for this reality TV show star doesn’t mean winning a trade war in the way that economists might envision.
It’s not a question of forcing concessions from trading partners that will improve our trade balance and the overall health of the economy. It’s a question of being able to hold something up that allows Trump to declare victory. That doesn’t require much.
If it is hard to imagine Trump celebrating concessions that were either never made or agreed to long ago, then just look at what happened at the NATO summit. Our partners in NATO had agreed back in 2014 to gradually increase their military spending to 2 percent of GDP by 2024. Apparently, they are still on this course.
Trump boasted of a huge victory for his leadership, pointing to their $33 billion projected increase in military spending for next year. He touted this increase, which comes to 0.16 percent of our NATO partners’ GDP, as “really amazing.” (Most of this was simply due to inflation.)
This is not the only area in which Trump has invented things out of thin air. He has gotten tens of millions of his followers to become incredibly fearful of being killed by the MS-13 street gang. In reality, most people in this country probably stand a greater risk of death from shark attacks than MS-13, but he used these fears as the basis for his crackdown on immigration.
Donald Trump is a person for whom reality matters little, if at all. Is there any reason that he wouldn’t just proclaim victory over China in the trade war a month or two before the election? He can announce that President Xi has committed the country to allowing most US goods to enter China with little or no tariff, something to which China is already committed to do under the rules of the World Trade Organization.
He can do something similar with Canada. Trump can announce that Justin Trudeau agreed to import over $600 million worth of dairy products tariff-free each year, describing the pre-trade war status quo as a great victory.
And, we can expect something similar with the European Union. Maybe he will announce that because of his tough measures the European Union will allow US made cars to enter almost tariff-free, something that is already the case.
Is there any reason to think that Trump couldn’t get away with just declaring the pre-trade war status quo a huge victory? After all, he has Fox News, his quasi-official media outlet, to head up the cheerleading, and no shortage of Twitter followers to get the good news directly from the top.
We also already know what he will say about the sore losers who try to challenge his victory in the Great Trade War with facts. This will all be “FAKE NEWS!”
This scenario seems so obvious that it’s amazing anyone ever thought any other outcome was possible. For a president who invents his own reality, why would he not just invent a victory in a trade war that looks likely to turn out badly based on the course he has taken?
Many years ago, George Aiken, a distinguished Republican senator from Vermont, came up with the idea of declaring victory in Vietnam and going home. The proposal was largely in jest, but it stemmed from a reality that we seemed to be mired in an endless war that served no obvious purpose. In that context, a meaningless declaration of victory, coupled with an ending of the war would have been a very good plan.
Half a century later, we are entering a trade war that serves no productive purpose over imaginary wrongs. We can all be happy if Trump ends the war before there is too much damage to the economy and people’s lives. His declaration of victory will be less laudable than Senator’s Aiken’s, but at least this pointless war will have come to an end.