(Yicai Global) April 10 -- "War is a continuation of politics by other means," Carl von Clausewitz famously declared. Trade is increasingly assuming that function, too. US President Donald Trump announced USD$60 billion in tariffs against Chinese goods, and China has promised to reciprocate in an escalation of rhetoric that threatens nascent global economic recovery.
Markets have already slid because of Trump’s ill-informed and unilateral decision, which shows his administration once again playing the part of a bull elephant in a china shop. The US leader, who vaunts his ‘gut instinct’ -- which must indeed be considerable if it is proportional -- is the same visionary sage who decided China was not manipulating its currency based on an argument propounded by a chocolate cake. He understands but little the issues and the amount at stake, which far transcends the USD375 billion the New York Times reported the trade imbalance as last month. The reasons for the disparity are structural, and irresolvable by resort to reciprocal sanctions. The US needs the affordable Chinese goods it can either no longer make itself or can only produce uncompetitively. Trade wars can also morph into military conflict -- as China’s own example of the 19th century Opium Wars with the UK demonstrates. The US yielding the field in new and clean energy and entirely abdicating it to China, again because of Trump’s backward-looking ideology, is also a policy scarcely calculated to shrink the deficit.
To use trade as a foreign policy weapon to advance a dubious agenda that rests more on populism, demagoguery and political expediency than sound economic sense is to misuse it and to throw the baby out with the bathwater.