Escalation of trade war clouds cheery US economic news

As the heavy fighting begins, assurance that trade wars are easy to win offers scant comfort.

The US and China, at this writing, were set to enact reciprocal tariffs totaling $34 billion each way.

Imposition of tariffs by the US already had provoked retaliatory levies totaling $12.8 billion from Canada, $3.2 billion from the European Union, and $3 billion from Mexico.

Those numbers don’t begin to account for the loss of favor from American allies or the weakening of confidence among many erstwhile supporters of Donald Trump.

It would help if the mercurial president could explain what victory in a trade war looks like.

He seems mainly to want to reverse trade deficits. But what good is that?

The US has legitimate trade grievances with China. Prominent among them are market access and intellectual property.

But flipping the bilateral trade balance will neither solve those problems nor balance US trade overall.

Trade pressure might force China to make concessions. Indeed, some say Trump is using trade as a multilateral lever for the deal-making in which he takes notorious pride.

But trade wars have consequences, most of them economically painful.

Trade wars are not won; they are, at best, merely survived.

On June 6, as US and Chinese tariff volleys escalated, the White House published a catalogue of cheery quotes from news reports under the title “Jobs, Jobs, Jobs: The American Economy Is Booming.”

Its introduction noted a fresh report that the economy beat expectations by adding 213,000 jobs in June.

For the economic boost that made that possible, Trump and his administration deserve credit. Timely tax reform and relaxation of hyperregulation have reinvigorated the economy.

Yet any conservative president could have made those changes. Any conservative president following Barack Obama would have made those changes.

But what other conservative president would then risk everything on brinksmanship over trade?

The economy now swerves toward peril with midterm elections 4 months away—time enough for recession to begin.

What a deal.

(From the subscription area of www.ogj.com, posted July 6, 2018; author’s email: [email protected])