Trump isn’t winning his trade wars

In the clinch, he keeps backing down.

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Tuesday, July 2, 2019

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Packages of Tyson-brand chicken products. Ramin Talaie/Corbis via Getty Images

Paul Krugman

Opinion Columnist

"Trade wars," Donald Trump famously declared, "are good and easy to win." But he's finding out that this isn't at all the case.

Let's define what we're talking about here. Even in the days before most world trade was covered by international agreements, trade wars, in the proper sense of the term, were rare.

Of course, there were lots of tariffs. But slapping on a tariff to protect an interest group isn't really a trade war. It's only a war if the goal isn't to reward some domestic players — anyone can do that if they're willing to break their existing trade agreements — but rather to compel foreigners to give you something you want. The infamous Smoot-Hawley tariff was stupid and destructive, but it wasn't designed to extract foreign concessions. The 1964 tariff on imports of light trucks, on the other hand, was originally intended to force Europe to accept imports of U.S. frozen chickens. Now that was a trade war.

It was also a failure. The U.S. never did get much of a foothold in the European chicken market, and the light truck tariff is still in place, 55 years later.

Of course, that trade war was, well, chicken feed compared with the Trumpian trade wars, which involve tariffs covering hundreds of billions' worth of goods. These tariffs are or were supposed to compel major policy changes in Mexico, China and ultimately other countries.

It's not working.

Mexico did agree to replace Nafta with the US-Mexico-Canada Agreement, which differs from Nafta in that … well, actually you need a magnifying glass to see the differences. And at the G20 summit, Trump put the threat of further China tariffs on hold and dropped sanctions against Huawei in return for some vague promises.

So why isn't Trump winning his trade wars? The trade hardliners in his inner circle probably thought America had a clear upper hand. After all, Mexico is far more dependent on the U.S. economy than vice versa; China sells far more to us than we do to them, so it would seem much more vulnerable to tit-for-tat retaliation.

But it seems to me that the Trumpian trade warriors made three crucial mistakes.

First, like all too many Americans, they failed to understand that other countries have their own nationalism, their own pride. Trump revels in humiliating his rivals; well, no Chinese leader will or probably even could make an agreement that looks like surrender to American demands.

Second, they failed to understand the changing character of modern trade. In the days of William McKinley, who some Trump advisers see as a role model, you could think of distinct national industries in competition with each — say, U.S. steel versus German steel. These days everyone's industry is enmeshed through complex global supply chains. A breakdown in Nafta would inflict immense damage on manufacturing on both sides of the border. So American industry isn't behind Trump's trade wars, the way it used to support McKinley-era protectionism. On the contrary, it's horrified at the prospect of more trade conflict.

Finally, Trump doesn't have a popular mandate for his trade wars. Voters by and large believe that his tariffs hurt the economy. And China's retaliation, while it affects a much smaller dollar value of products than the Trump tariffs, is hitting constituencies he depends on — especially farmers — hard.

None of this means that Trump is about to abandon all the tariffs he has imposed. But that's just protectionism, which really is easy. What isn't easy is winning a trade war. So far, Trump hasn't won any victories, and the odds are that he never will

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