The world is acquiescing in this highly destabilizing economic behavior, with G7, G20, Bretton Woods institutions (I.M.F. and World Bank) and the World Trade Organization looking the other way. Mercantilists are ignoring the concerns of their trade partners and their own obligation to balance trade accounts – the rule that lies at the foundation of the world economic order established in July 1944 at that beautiful New Hampshire resort.
President Trump has the merit of being the first American leader to warn that he will not tolerate the damage caused to the U.S. economy by abuses of the multilateral system of free trade.
Put more bluntly: Since trade surplus countries refuse to manage their economies according to the rules of the multilateral trading system, the U.S. will have to protect its jobs and incomes that are being threatened by annual trade deficits of $750 billion – where China, Japan, Germany and South Korea accounted for $508.5 billion in 2016.
That is an unassailable argument and a winning negotiating position.
But, sadly, it now looks like President Trump is losing that winning hand with meek and defensive trade rhetoric, tinkering around the edges of existing free-trade agreements, levying punitive tariffs and pushing bilateral deals on unwilling and downright hostile trade partners.
Washington should raise its game. The U.S. has a huge stake in a growing, orderly and balanced world economy. And if the U.S. does not lead – nobody will.
Kick over the table in Sicily
There is an opportunity for President Trump to transform a glad-handing G7 summit in Taormina, Italy, May 26-27, into a substantive discussion about the livelihoods in an exhausted, disoriented and mismanaged (G7) economy that represents 70 percent of the industrialized world. The president should do that, instead of wasting time with Europe's self-inflicted immigration disasters, its home-grown terrorism and politics of hate and division under Washington's security cover.