Issue of the week: Trump’s trade agenda

The arrival of a free trader at the White House is unlikely to curb the president’s protectionist proclivities

For all his whining about “fake news”, Donald Trump “totally made up stuff about the US trade deficit” in a recent discussion with Canada’s PM, Justin Trudeau, said Paul Brandus on Marketwatch. The US president now admits that he was clueless about whether America runs a deficit with its largest trading partner, but merely assumed it does because, in his words, “we’re so stupid”. In fact, the US enjoys a trade surplus with Canada, as Trump’s own trade wonks could have told him. But who cares about that if your mantra is that “trade wars are good, and easy to win”? Into this “swamp of presidential ignorance and dishonesty” steps Larry Kudlow, the White House’s new economic adviser. Since Kudlow, like his predecessor Gary Cohn, is a free trader, “there are already bets on how long he’ll last”.

So far, Kudlow – a veteran who served in the Reagan administration – has hedged his bets, declaring only that China can expect the US to take a tough stance on international trade, said Berkeley Lovelace Jr on CNBC. He had previously suggested that Trump’s steel and aluminium tariffs could cause a “major calamity”. There’s more to come, said Larry Elliott in The Guardian. The White House “has got the taste for protectionism and wants to go further”. The next salvoes will specifically target China: the administration is looking for “big damages” to compensate for intellectual property theft. “After that it looks like being Europe’s turn.” The ground is certainly fertile. The EU ran a $92bn trade surplus with the US in 2016 and, on average, imposes higher tariffs on US goods than vice versa. Measured in dollars, Germany runs an even bigger trade surplus than China. “The US president is at least honest about being a mercantilist; others tend to keep quiet about their protectionist proclivities.” But the IMF chief, Christine Lagarde, is right to argue that the lesson of the 1930s is that trade wars are “unwinnable”. Sadly, “Trump is not listening”.

So far, retaliations against Trump’s measures have been restrained, but “the economic damage will get really serious” if a proper trade war breaks out in a high-value sector like aviation, said Liam Halligan in The Sunday Telegraph. The greatest danger, once Washington or Brussels starts granting protectionist favours, is that “crony capitalism takes hold” more widely. The Smoot-hawley tariff of the 1930s, which helped plunge much of the world into the Great Depression, began as a plan to protect US agriculture. We must hope that sanity will eventually prevail, but it may be time to dust off the words of Georg Hegel: “We learn from history that we do not learn from history.”