Donald Trump has a new toy: tariffs. He seems to be putting them in roughly the same mental category as tweets: something to use to express instant frustration and vituperation. This is not exactly a policy, much less an effective one.
Trump's shadow trade war with China is reminiscent of his “mine is bigger” contest with North Korean dictator Kim Jong-Un. America imposes $50 billion in tariffs against China, Beijing retaliates with at least $50 billion in tariffs on U.S. exports, Trump doubles down to $100 billion.
One good thing about tariffs: They do less damage than nukes. We saw how both sides backed down from a nuclear confrontation in Korea. The professional trade negotiators will probably back Trump down from a full-blown trade war with China, too.
But here's the problem. When Trump's immediate tantrum dies down and his short attention span shifts to something else like National Guard troops on the Rio Grande, the issue hasn't gone away. North Korea remains more of a threat than ever. And China plays a long game—long as in several thousand years.
China, with its strong state, has a better hand than we do and China's astute leaders are playing their hand far better than Trump is. China's system of state-led capitalism, combined with coerced or stolen tech transfer, is eating our lunch.
At the end of the day, the tariff escalation has to end in a draw, and that will change nothing. Only a concerted effort by the West to insist that China play by something like symmetrical rules, even if not identical rules, will restore balance to the system. Tariffs can be part of a bluffing game, but they can't be the whole game.
The free trade establishment blew this challenge in one fashion. Trump is blowing it in another.
