Donald Trump is acting like a child again.
The U.S. president announced in a tweet Friday, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.”
The eye-popping tweet came after he announced that the U.S. would impose punitive tariffs on imports of steel and aluminum products, in a move he said would protect U.S. industries.
This is the first time a U.S. president has claimed trade wars are good and easy to win, a significant departure from previous Republican or Democratic presidents who largely stuck to the decades-old belief that trade wars are self-defeating and refrained from instigating them.
Trump’s vow to impose a 25 percent tariff on steel imports and 10 percent on aluminum has already worried trade partners and unnerved the Western financial markets. The Dow Jones industrial average closed 420.22 points lower Thursday, following news of the tariff plan.
Trump’s tariff plan is believed to be targeting China; however, the move will hurt U.S. allies most. Canada is the largest steel exporter to the U.S. market. Steel imports from Canada accounted for 16.1 percent of the U.S.’ total steel imports in 2017, according to U.S. Commerce Department data.
Brazil and South Korea ranked the second and third largest steel exporters, with their shares at 13 percent and 10.2 percent respectively. Steel imports from China only accounted for 2 percent of the U.S. total steel imports last year.
China’s aluminum exports to the U.S. accounted for around 14 percent of its total exports in 2017 and represented only 1 percent of China’s total aluminum production.
It is no surprise that Trump’s tariff plan has been met with opposition from its allies. European Commission President Jean-Claude Juncker said Trump’s decision amounted to “a blatant intervention to protect U.S. domestic industry” under the guise of national security. He announced Friday that the European Union is to slap tariffs on stereotypical American products such as Harley Davidson motorbikes, Levi’s blue jeans and Bourbon whiskey in retaliation for Trump’s new import tariffs.
Tadaaki Yamaguchi, chairman of the Japan Steel Information Center, called the tariff plan “ill-advised and naive.” “It will inevitably invite retaliation from America’s most reliable allies, ultimately hurting American non-manufacturing industries as well,” Yamaguchi was quoted by Politico as saying.
China has warned that Trump’s new move would have a “huge impact” on the global trading order and said it would work with other nations to protect its interests.
In fact, China has been taking great pains to cut steel overcapacity, a global phenomenon that the U.S. said has led to low-priced steel products dumped into the U.S. market. A victim of industrial overcapacity, China launched a supply-side reform in 2016 that has seen capacity in industries like steel and coal slashed as the country seeks higher-quality growth.
Since 2016, China has cut more than 115 million tons of steel capacity and eliminated an additional 140 million tons of low-quality steel capacity, according to official statistics.
While the U.S. has repeatedly accused China of various “unfair trade practices,” the Trump administration has been taking one protectionist measure after another. In January it forced AT&T to cut commercial ties with Huawei on the groundless suspicion that the Shenzhen-based telecom gear giant poses a national security threat to the U.S. Last month, Trump slapped “America First” tariffs on imported washing machines and solar panels, which most heavily affected China and South Korea.
His administration is also pursuing a beggar-thy-neighbor policy by accommodating a weak dollar that would make U.S. products cheaper in overseas markets at the expense of the manufacturers in other countries.
U.S. Treasury Secretary Steven Mnuchin has not tried to hide his preference for a “weaker dollar.” Speaking during a panel at the World Economic Forum in Davos, Switzerland, on Jan. 24, Mnuchin said, “Obviously, a weaker dollar is good for us as it relates to trade and opportunities.”
This marked the first time in recent history that a top American economic official has openly spoken in favor of a weaker dollar. China and other U.S. trade partners have reason to launch an investigation on whether the U.S. should be labeled a currency manipulator.
The World Trade Organization (WTO) has been a venue for countries to settle their differences through negotiations since its inception in 1995. Yet Trump is abandoning multilateral and bilateral talks and instead taking to social media to launch a barrage of taunts and threats.
Trump is now unwinding America’s 50 years of trade progress, started by President John F. Kennedy who used the Trade Expansion Act of 1962 to negotiate tariff reductions, paving the way for the Kennedy Round of General Agreement on Tariffs and Trade (“GATT”) negotiations that ended in 1967 and eventually led to the creation of the WTO.
Trump’s brinkmanship has even unnerved politicians of his own party and American business leaders. His top economic adviser Gary Cohn tried to prevent the imposition of steep tariffs but to no avail. Senate Republicans also expressed fear that his actions would greatly increase costs for manufacturers in other industries and undermine some of the gains of the massive tax overhaul.
Overseas analysts have pointed out that Trump’s tariff plan, if carried out, could derail the US$250 billion deals U.S. companies signed with China during Trump’s visit to Beijing in November. Many of the deals are in the form of memorandums of understanding and other non-binding agreements.
Resolving trade issues needs earnest investigation, patient negotiation and painful concessions. It is time for Trump to stop his tweeting stunts and let his trade representatives sit down for sincere talks with trade partners.
(The author is head of the Shenzhen Daily News Desk.)