Sir, Donald Trump’s trade policy makes him look like the Grand Old Duke of York. He marches his troops up the hill, then down the hill, and then neither up nor down. He plunges into protectionist declarations and then retreats, cycles and ends up doing little besides fulminating, destabilising financial markets, and elevating business uncertainty.
Meanwhile Peter Navarro (“ Donald Trump is standing up for American interests”, April 9), gives us plenty of food for alarm. If passionate assertion unencumbered by concern for accuracy or economic logic were the currency of sound policy, we would be heading for a new golden age. Sadly, we are at risk of plunging headlong in the opposite direction thanks to a wrong-headed embrace of trade policies unseen for over seven decades. Policy change is needed in China, as elsewhere, but a cudgel targeted at the wrong objective is hardly the instrument for the job. Negotiation generally works better.
Despite Mr Navarro’s declaration that President Trump “seeks only a shared prosperity based on trade peace”, the record so far is one of aggressive insistence that the world must fix American problems of its own making. The centerpiece of the faulty logic sustaining these actions and threats has it that US trade deficits reflect losses deriving from the dastardly behaviour of trading partners, most particularly China.
US protectionist actions against China will not affect the deficit, nor will trade reforms by China. Indeed, the tax cuts heralded by Mr Navarro will boost the fiscal deficit and increase the trade deficit. Assuming for the sake of argument China is willing to pursue specific policy reforms, Mr Trump will continue to be able to point to the deficit as evidence that China persists with “unfair” policies that justify a US protectionist response. Heads I win, tails you lose. Why would China engage in a rigged game in which it gets the blame for something that is largely the result of US policies?
Perhaps we should hope that the Grand Old Duke of York ignores his faithful retainer advising war and marches back down the hill when his farm supporters rise in revolt against further confrontation.
European University Institute, Florence, Italy
Visiting Professor, University of Hong Kong
Professor of Economics, University of St Gallen, Switzerland
Professor Emeritus, School of Policy Studies, Queen’s University, Ontario, Canada
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