On Monday, the Trump administration announced tariffs on about $50 billion worth of imported goods from China, aiming to punish the country for alleged violations of American intellectual property. The Chinese clapped back Tuesday with retaliatory tariffs on about 106 categories of American products, including soybeans, cars, and whiskey.
Stock market futures plunged overnight, leading the Dow to open Wednesday morning down 450 points. But Trump was ready to go with a pair of reassuring tweets indicating that either there would be no trade war or else maybe trade wars are good.
This reflects a view that Trump has consistently maintained in his personal rhetoric and that has been reflected in the official documents put out by some of the members of his trade team — trade deficits are per se bad, reducing them induces prosperity mechanically, and so there is no downside to a trade war with a country with whom the United States runs a large trade deficit.
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One big question hanging over Trump even since the campaign has been whether this is something he really believes and is prepared to act on as president, since it happens to be totally wrong. And while so far nothing Trump has actually done on trade is all that significant in the grand scheme of things, perpetually making policy on the basis of a total misunderstanding of the issue is potentially quite dangerous.