Over two years on from stridently declaring “I don’t mind trade wars we’re losing a billion a year”, Donald Trump has finally started one. After imposing $50 billion worth of trade tariffs on China on the 3rd April, Trump has been met with a decidedly hostile Chinese retaliation, with China now proposing what the American Soybean Association have labelled a “devastating” 25% tariff on soybeans. This retaliation alone lost soybean farmers over $1.5 billion on the 4th April as soybean futures plummeted. Trump may think that “trade wars are good, and easy to win”, but they could spell disaster for the American economy – and for his presidency.
Over 20 years ago now, Ross Perot, the independent candidate for President in 1992 and Reform Party candidate in 1996, became one of the first serious modern right wing critics of free trade. In a 1992 Presidential debate Perot painted a dark vision of an America whose jobs had been “stolen” as factories went south of the border – there would, he predicted, “be a giant sucking sound going south”. A certain section of the American right has been hooked ever since. Their movement, fuelled by a xenophobic distrust of Mexicans as “job stealers” (or bad hombres for the President) and the dissatisfaction of blue collar workers (genuine victims of globalisation in the short term), was crystallised by figures like Perot and Pat Buchanan, who made populist promises to put America first. When Donald Trump descended a golden escalator like a comic perversion of a god three years ago, he spoke to every one of their desires, and in short order pledged to do everything he could to put American business first, including implementing disastrous trade tariffs.
Trump may think that “trade wars are good, and easy to win”, but they could spell disaster for the American economy – and for his presidency.
Yet the reality is that protectionism and a trade war would be disastrous. Trump’s Secretary of Commerce Wilbur Ross can dismiss China’s response as a “hardly life threatening” action at 0.3% of American GDP, but such a targeted response on one trade could destroy the livelihoods of those involved in it, all the while destabilising the stock market and brining Trump’s personal brand of uncertainty to the world economy. What’s more, this needn’t stop with Soybean tariffs. China has the means of responding tit for tat with the US if Trump continues to play at trade wars, and she no doubt will if the US gives her no recourse but to do so. A US-China trade war would not only damage the countries involved, but would have a knock-on effect disrupting global supply chains, and raising costs of living worldwide. Indeed, though Trump may point to the rallying of the markets despite a seeming slump, this was almost wholly due to Larry Kudlow (Trump’s chief economic advisor) claiming that “There’s no trade war here”. If Trump wants to keep the stock market strong and the economy ticking away (something he has falsely taken credit for time and again) then his economic antics must end.
At the ballot box and in key congressional votes protectionism may hurt Trump – and his presidency – even more. Since the end of the Second World War, but especially since the beginning of the Reagan revolution, the Republican Party has been focused on economic freedom and has supported free trade. Republican Senators, Congressmen, and voters, all proud of their reputation as the “party of business”, have long supported the economic benefits of free trade. It was Ronald Reagan, a Republican hero, and not a liberal globalist, who proposed NAFTA for the first time (in a 1979 campaign speech), and it and other economically liberal policies have always had profound support on the right. The very reason Ross Perot and Pat Buchanan ran independently of the Republican Party was that Republican primary voters and party leaders rejected their economic policies outright. Trump and his alt-right paleo-conservative followers are an outlier, and they are one that the extreme economic liberals in the GOP (many of whom are bankrolled by crucial billionaire donors like the Koch brothers) have a distinct interest in stopping. They have fallen behind Trump’s unorthodoxy so far, but untrammelled protectionism could simply prove to be too much for them. Suburban middle class Republicans, some of the primary beneficiaries of free trade, may lap up Trump’s economically nationalist rhetoric at first, but if protectionism escalates they will quickly sour on the idea of rising food, car, and television prices. Their wallets will compel them to abandon Trump if the trade war becomes too much.
More so even than his gaffes, scandals, and potentially impending impeachment or indictment, the economic disaster that a trade war would prove to be could be Trump’s political undoing. Presidents struggle when the economy does, and every indicator suggests that economic nationalism will bring about a period of prolonged economic difficulty for American businesses, alongside global economic instability. The recovery of the Dow Jones was illusory, primarily the consequence of the market’s faith not in Trumpist protectionism, but in his advisors to prevent him from implementing catastrophic policies. If Trump, now unbound by Gary Cohn (his former economic advisor), goes ahead with the arch-protectionist policies which economic nationalists in his circle of advisors are gunning for then he could alienate voters and party allies, all while tanking the economy. Trump may think winning trade wars is easy, and only the future will tell if his bravado is held out in reality, but every sign suggests it won’t be.