Earlier this year when President Trump began beating the drums loudly, causing fear of a trade war (and assuring us that such a conflict could be easily won), I cautioned that he had no idea the trouble he was courting . Based on his spectacular misunderstanding of the power dynamic built in to international trade, he was also in danger of bringing a knife to a gunfight.
As the year has progressed, the underbrush has gotten thornier, Trump's progress on trade has slowed, and now it has likely stopped altogether. Despite that, in true Trumpian fashion, the President has declared resounding victory. But a quick look back reveals the opposite to be true.
The first shot in Trump's trade offensive was his decision, shortly after he was sworn in as President, to withdraw the U.S. from the 20-nation Trans-Pacific Partnership (TPP). (1/2017 press release, Office of U.S. Trade Representative) As that agreement, which had sought to create a free trade zone uniting the Americas and Asia, was still being negotiated, the move was relatively easy and painless; a quick headline to suggest that Trump intended to keep campaign promises. Since that time, analysts agree that China has taken advantage of America's absence by picking up the stalled negotiations and recasting them in a China-centric framework.
But the first real move against a living target came with the President's bid to rewrite, or even fully scrap, the North American Free Trade Agreement (NAFTA), the Bill Clinton-era deal with Canada and Mexico that has greatly transformed business on this Continent. On the campaign trail, and in the White House, Trump repeatedly labeled NAFTA as one of the worst deals in history, a catastrophe for the American economy, and perhaps the single greatest cause of our current economic malaise. As a result, Trump's trade negotiators began knocking on doors north and south of the border very early in his Presidency. But those negotiations never went anywhere.
Trump representatives quickly ran into the stone wall of economic reality and came to understand that although Mexico and Canada are much smaller than the U.S., they can push back strongly on commercial and political fronts. After threats and counter threats (including Trump's attempt to have Mexico "pay" for the border wall through NAFTA concessions), it now appears that the current round of talks will expire with no substantive changes in the NAFTA framework.
But the main event in Trump's trade war was supposed to emerge with China, the number two economy in the world and America's chief economic rival in all things commercial. China's gargantuan $375 billion annual trade surplus with the U.S., according to U.S. Census Bureau figures for 2017, is responsible for nearly half of America's total trade deficit and is by far the largest such bi-lateral figure in the world. Clearly, any successful campaign to improve America's trade position had to go through Beijing.