Until fairly recently, I didn’t really think we were going to have a trade war. What I thought would happen, instead, was a bit of kabuki: America’s major trading partners would make cosmetic concessions – perhaps with some lucrative payoffs to Trump businesses on the side – that would let Trump proclaim a “win”, and trade would go on much as before.
The reason I expected this relatively benign outcome wasn’t that Trump would get or take good advice. It was, instead, the expectation that big money would talk: corporations have invested trillions based on the assumption that an open world trading system, permitting value-added chains that sprawl across national borders, was going to be a permanent fixture of the environment. A trade war would disrupt all these investments, stranding a lot of capital, and I thought big business would get either manage to get that message through to Trump or at least get it through to Republicans in Congress, who would act to limit his room for maneuver.
But these political considerations look a lot less compelling now than they did a few months ago. With Gary Cohn gone, it’s not clear that big business has any real pipeline into the White House (OK, polluters have an open line to Scott Pruitt, and predatory lenders a line to Mick Mulvaney, but these aren’t the groups who will stand up against trade war.) And Congressional Republicans, terrified of the Trump base, have proved unwilling to take a stand on anything, even if big money is at stake.
Meanwhile, trade decisions are being made at Trump’s whim, without input from anyone who knows anything about trade economics (Peter Navarro thinks he understands the economics, which is even worse.)
