Trade Wars – No winners

March 2 is getting way too close for comfort.  The stock market crashed yesterday as hopes dimmed on any negotiated settlement.  The two hard core hawks in Trump’s administration (Lighthizer and Navarro) are likely in control, working on the premise that once we exert enough economic pressure, China will cave in.

Trade wars are unlike real wars.  In this case, we know exactly how China will react on March 2 when tariffs go to 25%.  They will try to match us dollar for dollar. It will simultaneously  hurt both countries.   The slowing Chinese economy coupled with a general slowdown in Europe, will make for less demand for US goods abroad.

China can withstand a lot more pain than we can.  They know this and we know this.   Trump talks about doing what is right for our country, while Chinese leaders talk about global cooperation.   Wow, it used to be the other way around.   It is a mess, because we need China’s help in convincing North Korea to end their nuclear plans.

Republicans used to be for free trade, but by embracing Trump’s policies, they are really for isolation and protectionism.

Stay tuned.

Dave

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