{"id":7374,"date":"2025-03-11T16:53:24","date_gmt":"2025-03-11T15:53:24","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=7374"},"modified":"2025-03-11T16:58:19","modified_gmt":"2025-03-11T15:58:19","slug":"who-can-stop-trumps-trade-war","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2025\/03\/11\/who-can-stop-trumps-trade-war\/","title":{"rendered":"Who Can Stop Trump\u2019s Trade War?"},"content":{"rendered":"

Consumers-voters and the manufacturing industry are the clear losers in the trade war against China that Trump will pursue with renewed energy. Yet, they do not raise their voices; on the contrary, they largely support the president\u2019s choices. However, the cost could turn out to be much higher than the cautious estimates proposed by analysts. In an increasingly polarized context, a brake on tariff policy could come from inflation and stock markets.<\/em><\/p>\n

 <\/p>\n

With Donald Trump\u2019s return to the White House, a new phase of the trade war between the United States and China has begun. The alleged collusion of Beijing in the production of the opioid Fentanyl, which claims tens of thousands of lives each year in the U.S., has provided the tycoon with a pretext to impose a generalized 10% tariff on Chinese imports. The Asian giant promptly responded with a 15% tariff on U.S. coal and liquefied natural gas, along with an additional 10% tariff on oil, agricultural equipment, and certain automobiles.<\/p>\n

On the other hand, there was no real truce in the trade conflict even under Biden\u2019s presidency. The approach merely shifted from Trump\u2019s generalized tariffs and the negotiation of a major agreement (Phase I Agreement<\/em>) to the more targeted and sectoral approach pursued by his successor.<\/p>\n

The Trade War Never Ended<\/strong><\/h3>\n

Under both presidents, controls on the export of certain technologies have intensified. In fact, one could argue that Biden\u2019s measures were even more incisive in this regard. The Democratic administration abandoned dramatic rhetoric and replaced chaotic decision-making with methodical action, but the legal foundations for the trade war\u2014introduced during Trump\u2019s first term\u2014were systematically used and even expanded over the following four years.<\/p>\n

The result is that, at the beginning of 2025, U.S. tariffs on Chinese imports are far higher than those in place in 2017, when Trump first took office.<\/p>\n

In essence, Beijing and Washington have suspended the WTO rule on fair treatment of imports\u2014the principle that requires member countries to treat local and imported products equally\u2014at least concerning each other\u2019s products. And this suspension remained in place for the four years Biden was in office.<\/p>\n

Lessons from the First Term<\/strong><\/h3>\n

It is highly likely that in the new phase of the trade war against China, Trump will draw lessons from his first term. For someone who prides himself on deal-making, it is almost certain that the results of the Phase I Agreement<\/em> signed with Beijing on January 15, 2020, were disappointing. As the data show, China did not meet its commitments to increase purchases of U.S. products, which were supposed to significantly reduce the U.S. trade deficit (see box below).<\/p>\n

Now, it would not be surprising if Beijing tried to negotiate another agreement with the U.S., if only to buy time. However, to satisfy the president, the terms of the new deal would have to be significantly tougher\u2014perhaps to the point of forcing Beijing to reject them. Trump\u2019s negotiators might, for example, link any reduction in import tariffs to the prior achievement of specific targets for additional purchases of American goods.<\/p>\n

What is certain is that the tariffs imposed so far have not led to a reform of China\u2019s state-driven economic model. Moreover, President Trump never refers to Beijing\u2019s non-market practices, such as massive subsidies to its domestic industries. Even during the election campaign, he instead focused on China\u2019s trade surplus with the U.S. (which he perceives as money lost by the United States), the loss of manufacturing jobs in the U.S., particularly in the Rust Belt\u2014the region stretching from the northern Appalachian Mountains to the Great Lakes, once the heart of the country\u2019s heavy industry\u2014and the struggles of communities affected by offshoring.<\/p>\n

He likely does not believe in the idea that a great power can change its industrial policy in response to pressure from another great power\u2014after all, the U.S. itself would never do so.<\/p>\n

 <\/p>\n

\n

What Is the Trade Deficit?<\/strong><\/p>\n

The trade balance, or trade surplus\/deficit, is the difference between the monetary value of a country\u2019s exports and imports over a given period.<\/p>\n

    \n
  • If the value of imported goods exceeds that of exported goods, the country has a negative trade balance or trade deficit.<\/li>\n
  • If the value of imported goods is lower than the value of exported goods, the country has a positive trade balance or trade surplus.<\/li>\n<\/ul>\n
    \n

     <\/p>\n

    A Team Without Experts<\/strong><\/h3>\n

    This time, however, there is an additional factor to consider: among Trump\u2019s cabinet members and advisors, there is no supporter of globalization in key economic policy roles. Even those who are not directly linked to the nationalist economic wing of the Make America Great Again<\/em> (MAGA) movement have publicly stated that imposing high tariffs can be part of a brilliant negotiating strategy.<\/p>\n

    It is unclear whether these non-nationalists truly believe in tariffs as a bargaining tool, but their statements nonetheless reveal the price of admission to Trump\u2019s second administration: open opposition to tariff increases will not be tolerated.<\/p>\n

    It is also evident that Trump\u2019s second-term team includes fewer \u201cexperts.\u201d However, if we believe the detailed accounts of his first term, the so-called \u201cexperts\u201d did not have much influence on trade policy even then. Their only real achievements were preventing the cancellation of the U.S.-South Korea free trade agreement and the NAFTA agreement between the U.S., Canada, and Mexico.<\/p>\n

    Who Can Stop the President?<\/strong><\/h3>\n

    So who, or what, can put the brakes on this new phase of the trade war? Trump has reiterated so many times his commitment to raising tariffs on Chinese goods by at least 60% that part of his electorate would be disappointed if he did not follow through. Moreover, his opposition to foreign economies with trade surpluses with the U.S. is one of the few firmly held beliefs of the American president.<\/p>\n

    However, it would be a mistake to expect a straightforward and predictable implementation of the new tariffs. Beyond all the threats, Trump is well aware that the cost of living is a major concern for many American voters, and he closely follows the performance of the U.S. stock market.<\/p>\n

    During the re-election campaign, the tycoon sought to capitalize on voters\u2019 discontent over rising prices in recent years. Now that he is back in the Oval Office, if inflation were to resurface for any reason, he might be more cautious about raising tariffs, precisely because they would add additional inflationary pressure.<\/p>\n

    Trump does not want to become unpopular, and midterm elections are coming in 2026\u2014he cannot afford to let his policies cost the Republicans control of the House and Senate. He might impose new tariffs only on components, parts, and machinery, sparing consumer goods. But even in this case, Democrats could still attempt to link trade war policies to any consumer price increases.<\/p>\n

    If inflation risk becomes real, Trump might even find reasons to reduce import tariffs\u2014if only temporarily.<\/p>\n

    Another key factor is how this new phase of the trade war will impact U.S. stock market indices. The market value of companies dependent on imports has been declining since November, the day of the presidential election, due to the likely introduction of higher import tariffs. So far, this has been offset by substantial increases in the value of certain tech and consumer goods companies, mainly driven by expectations of deregulation and tax cuts.<\/p>\n

    However, if these measures were delayed or fell short of market expectations, the negative effects of tariffs could come back into focus. The consequences could be severe, especially if investors become convinced that the trade war will shrink business capital. Stock markets are fickle, and for better or worse, Trump sees them as a barometer of economic vitality. One of the few levers he has to influence them is delaying or softening tariff policies.<\/p>\n

    Trade war, stock market trends, consumer price inflation, Federal Reserve monetary policy, and long-term U.S. Treasury yields are all interconnected factors that influence each other. And Trump will take them into account.<\/p>\n

    An Uncertain Future<\/strong><\/h3>\n

    In conclusion, the future of trade relations between the world\u2019s two largest economies will be largely shaped by macroeconomic developments. Moreover, the ongoing violations of international trade rules by both economic giants could push other governments to follow suit.<\/p>\n

    In short, much more is at stake than just the price of toys for Christmas 2025: the systemic cost of the next phase of the U.S.-China trade war remains to be seen.<\/p>\n

    The obstacles the U.S. president will face in continuing the trade war are not those found in economics or law textbooks, and this alone should make us reflect.<\/p>\n

    From a legislative standpoint, the legal foundations for implementing this policy were largely established during Trump\u2019s first term. From a public opinion perspective, if polls have any indicative value, they show that many voters today support tariff increases\u2014even if they result in a higher cost of living that ultimately falls on American consumers themselves.<\/p>\n

    Manufacturing companies that rely on imports remain silent for now. They are the clear losers in the next phase of the trade war, yet they show no sign of trying to constrain the U.S. administration. Amid the growing hostility toward China that pervades Washington, D.C., even analysts willing to publicly oppose the trade war are becoming fewer.<\/p>\n

    Once again, there is much to consider for those seeking to understand the rationale behind trade policy decisions in an era marked by deep domestic political polarization and the belief that production and wealth are fixed quantities\u2014where some people\u2019s gains are inevitably equal to others\u2019 losses.<\/p>\n

     <\/p>\n

    Simon J. Evenett, an economist specializing in international trade, is a professor of geopolitics and strategy at IMD Business School in Lausanne. He is co-chair of the Trade and Investment Council of the World Economic Forum and was co-director of the Trade and Regional Economics program at CEPR for many years.<\/em><\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

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