Why Trump’s combative trade stance toward allies poses risks
WASHINGTON — Insulting the host, alienating allies and threatening to suspend business with other countries: President Donald Trump was in full trade-warrior form for the weekend summit of the Group of Seven wealthy democracies in Canada.
The president’s acrimony raised the risk of a trade war that could spook financial markets, inflate prices of goods hit by tariffs, slow commerce, disrupt corporations that rely on global supply chains and jeopardize the healthiest expansion the world economy has enjoyed in a decade.
Leaving the conclave in Quebec on Saturday, Trump threatened to “stop trading” with America’s allies if they defied his demands to lower trade barriers. And he shrugged off the risk that his combative stance would ignite escalating tariffs and counter-tariffs between the United States and its friends — the European Union, Canada, Japan and Mexico.
“We win that war a thousand times out of a thousand,” the president declared before jetting off to negotiate the denuclearization of the Korean peninsula.
Later, he picked a Twitter fight with the host of the G-7 conclave. Calling Prime Minister Justin Trudeau of Canada “very dishonest and weak,” Trump said the U.S. was withdrawing its endorsement of the G-7’s communique, in part over what he called Trudeau’s “false statements” about U.S. tariffs at a news conference.
“I think the way this plays out is we end up with our trading partners responding in kind — a threat for a threat, a tariff for tariff,” said Rod Hunter, a lawyer at Baker McKenzie and a former economic official on the National Security Council. “You end up with gradual escalation.”
The summit at Quebec’s Charlevoix resort failed to produce any truce in an intensifying trade conflict. Trump has imposed tariffs on steel and aluminum imported to the United States from the EU, Canada and Mexico. He has justified the tariffs by claiming that a reliance on foreign steel and aluminum threatens U.S. national security.
Outraged, the allies have responded by targeting American products, including cheese, bourbon and pork. On Saturday, Trump warned that “if they retaliate, they’re making a big mistake.”
Trudeau’s assessment was glum.
“If the expectation was that a weekend in beautiful Charlevoix with all sorts of lovely people was going to transform the president’s outlook in the world,” the Canadian prime minister said, “then we didn’t quite reach that bar.”
Trump had run for the presidency on a vow to shrink the gaping U.S. trade deficit — $566 billion last year. To him, the gap between the value of what America sells and what it buys in foreign markets reflects economic weakness, trade accords unfair to the U.S. and abusive policies by other countries.
Turning his campaign rhetoric into action against friend and foe, he has taxed imported solar panels and washing machines, imposed tariffs on steel and aluminum, threatened tariffs on up to $150 billion worth of Chinese products and ordered an investigation into whether imported cars, trucks and auto parts should be taxed — on national security grounds.
“He’s a puncher or a counterpuncher, and he thrives on conflict,” Hunter said. “He’s not likely to change. As long as he’s president, this is the approach we have to expect.”
Tim Buthe, a Duke University political scientist who studies trade, said, “Is it possible that Trump sees this mostly as a poker game and is just bluffing, and if the others cut him a deal, we’ll return to normal relatively soon?”
Yet Buthe cautioned: “These kind of things can spiral out of control fairly quickly” as countries hammer each other with escalating retaliatory tariffs.
Speaking to reporters at the end of the summit, Trump repeated his assertion that other countries — including friendly allies — have outwitted U.S. negotiators in the past, capitalized on flawed agreements and run up big trade surpluses with the United States. The United States last year posted a trade gap in goods and services of $101 billion with the EU, $57 billion with Japan and $69 with Mexico. (The U.S. managed a $3 billion surplus with Canada.) Trump has condemned Canada’s tariffs on imported dairy products and the EU’s tariffs on auto imports.