THE FIRST ROUND of U.S. tariffs on China takes effect Friday: Will July 6, 2018, turn out to be a date that lives in economic infamy, like June 17, 1930, the day President Herbert Hoover signed the Smoot-Hawley Tariff Act?
By itself, Mr. Trump’s opening salvo, a 25 percent tariff on 818 Chinese imports, worth $34 billion a year, amounts to a rounding error as compared with the overall size of the U.S. and Chinese economies. Moreover, it’s not inherently misguided to get tough with China over its relentless mercantilism, which has long disadvantaged U.S. businesses and which more recently took the form of a “Made in China 2025” policy that seeks dominance for the People’s Republic in cutting-edge technology. Alas, Mr. Trump seems fixated on tariffs as a means to a far less legitimate, far less realistic (and far more simplistic) goal: reducing the merchandise trade deficit, which was $376 billion last year, between the United States and China. He has already threatened to escalate U.S. tariffs to cover nearly all the goods the United States imports from China if he does not get his way.
There would be a better chance of success against China if Mr. Trump were working in concert with other countries, including the United States’ traditional allies and trading partners with which the United States has long enjoyed relatively free trade: Canada, Mexico and the European Union. Instead, Mr. Trump is recklessly antagonizing them, suggesting that they deliberately exploit the United States and threatening to impose tariffs on imported cars in addition to steel and aluminum.
Mr. Trump does have leverage, in the sense that all of these countries depend far more on exports than the United States does. They are undoubtedly reluctant to do much more in response to Mr. Trump’s tariffs than impose reciprocal measures of their own, as long as there is any hope of negotiating a settlement. At a certain point, however, they may decide that tariffs are not a means to an end for the American president, but an end in themselves. And that may prompt them to give up on persuading the United States and to join forces against it instead.
Tariffs create all sorts of inefficiencies, unintended consequences and uncertainty, none of which is good for an interdependent global economy. In a way, though, these are the least of the worries that Mr. Trump’s policies raise. More fundamental is his dishonest use of national security as a rationale for new trade barriers, even against allies such as Canada, and his equally false accusation that the World Trade Organization has been biased against the United States. By delegitimizing such alliances and institutions, all of them created under U.S. auspices in the postwar era to help prevent global economic competition from fueling international conflict, Mr. Trump takes U.S. foreign policy generally back to the Smoot-Hawley era. That was a time when trade wars were liable to turn into real wars, a lesson of history that Mr. Trump has obviously failed to learn.