Trump's simplistic view on trade wars

1. Donald Trump tweeted his simplistic view on trade wars on 2 March 2018.

"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!"

Source: https://twitter.com/realDonaldTrump/status/969525362580484098

2. Similarly a poster in a political forum came up with a false premise that China will lose in a trade war with the US, and he suspected the trade war will be brief. Can anyone debunk his misguided premise?

Excerpts from that poster's thread follow:

(Begin excerpts)
In order to win a trade war, you have to either be even with the other country, or have a trade deficit with them. The one thing you can't have is a trade surplus.

If you have a trade surplus, you don't have any leverage to use tariffs against the other country. And the bigger the trade surplus, the less leverage (or trade war power) you have. In China's case, their surplus is gigantic.

China exports 6 times as much $tuff to the US, as vice versa. So this is like 2 people putting up money for something. One puts up $10, the other $60. The $60 guy has a lot more to lose. (End excerpts)

P.S. In short, that poster's argument is based on the false premise that China has no room to manoeuvre in a trade war with the US.

People generally equate the greater number with superiority and victory. That's why when I raised the issue about Trump's misguided premise, my great friend Ralph claimed that "it (US easy victory in a trade war against China) actually is NOT rocket science".

Those who opine a country with more deficits should win a trade war compare it to a game of go or chess in which a player with more pieces has a clear advantage. Donald Trump said on July 20, 2018 that he was ready to impose tariffs on all $500 billion of imported goods from China. It seems that the US would certainly win the trade war as China could not match it dollar for dollar in tariffs. Using another analogy, if Paris, the Trojan prince, could send only 100 warriors to fight against 500 Greek warriors outside the gates of Troy, all his men would be exterminated.

However, it is irrational to regard deficits as beneficial. Hence it is irrational to regard a country suffering deficits in trade as having "more firing power" in a trade war. Rather, we should compare a country with deficits to an ugly man with defects in his body. Hence the US which may impose tariffs on $500 billion of imported goods is analogous to a man who may undergo a plastic surgery on 500 parts of his body. China which may retaliate with tariffs on $100 billion of imported US goods is analogous to a man who may undergo a plastic surgery on 100 parts of his body.

Using the last analogy, it could be seen why Trump is hesitating to deliver the coup de grâce in the trade war. So far, it is “NATO”, i.e. “No Action, Talks Only”. Using a Chinese idiom, "there is a lot of thunder and lightning, but few raindrops". Most probably, at the back of his mind, he is faintly aware of the risk that Uncle Sam may never wake up from a plastic surgery on 500 parts of his body. :angel:

https://www.reuters.com/article/us-...-500-billion-of-chinese-imports-idUSKBN1KA18Q

https://en.wikipedia.org/wiki/Hector

Ralph47 said:

So for how much longer are you going to continue to knock true prosperity? :giggle:

Click to expand...

Till our great friend Ralph, the most faithful goalkeeper for Trump, sends the ball into his own goal.