Donald Trump’s trade war just backfired on him spectacularly
It’s still far from clear precisely why Donald Trump decided to start a trade war in recent weeks. Was it out of random frustration? Was it a last ditch distraction from his scandals? Was it, as some have alleged, a calculated plot to help a handful of investor friends? In any case, his trade war has gone so poorly that his chief economic adviser Gary Cohn has already resigned over it. As of today, the other shoe has dropped – and the whole thing has blown up in Trump’s face in spectacular fashion.
China just implemented three billion dollars in tariffs on more than one hundred U.S. products. The Chinese government had spent the past ten days threatening such a move, and after Trump did nothing to back down from his anti-trade stance, China has gone ahead and made it official. We expect the U.S. stock market to take a major tumble in the morning, as this kind of escalating trade war is bad news for economies across the board. The question is what Trump will do next.
We’ve learned time and again that no one wins in this kind of trade war. The U.S. and its major trading partners can keep hiking up tariffs against each other, until everyone’s economy is in a recession. So unless Trump quickly backs down, he’ll quickly wreck the booming economy he inherited from President Obama. Is Trump so desperate to distract from his scandals that he’s willing to settle for a recession as a distraction? Does he simply not understand how international trade works? Or is he too stubborn to admit he’s losing this gambit?
Donald Trump will surely have something not-so-nice to say about the government in China in response tomorrow morning during his customary pre-dawn Twitter tirade. But at this point attacking China can only serve to further sap the confidence of increasingly wary investors. The Dow Jones Industrial Average is already down roughly 1500 points from its high in January – and that’s before the expected plunge on Monday morning.
