As described by Investopedia, a negative side effect of protectionism occurs when Country A raises tariffs on Country B’s imports in retaliation for Country B raising tariffs on Country A’s imports. Trade wars may be instigated when one country perceives another country’s trading practices to be unfair or when domestic trade unions pressure politicians to make imported goods less attractive to consumers. Trade wars are also a result of a misunderstanding of the widespread benefits of free trade.

Trump’s declaration of a trade war with China and many other developing countries in the world comes at a time when US wars in MENA region have battered the US economy, the United States remains divided internally and Trump scandals are becoming a daily routine.

CNBC report on 5 April decried about the coming trade war, “as the United States and China inch closer to a full-fledged trade war, economists and investors worry about worst-case scenarios that could impact the global economy and America. The war of words keeps getting harsher. China announced that it may put tariffs on $50 billion worth of U.S. goods in retaliation against the Trump administration’s plan for imposing 25 percent duties on Chinese imports. Markets were sent spinning, while everyone is now wondering what might come next”.

Quoting Jeff Mills, co-chief investment strategist at PNC Financial Services Group, the CNBC also stated that China holds about 20 percent of U.S. debt held by foreign countries and if China does decide to dump treasuries, it could make others panic and sell as well. It will also become more expensive for the U.S. government to issue debt they’ll have to pay higher rates to borrowers, while the $15 trillion of treasuries held by itself and investors would fall in value. Equities would be sent crashing, too, as yields climb. “Higher interest rates would ripple through the entire economy,” says Mills. “It would have a slowing effect.”

President Trump should understand that the international trade system is not only hardwired but also connected through a delicate cobweb of interdependent systems, which when abruptly disturbed, can unleash a butterfly effect, creating a financial chaos throughout the globe.

Chinese response has been well measured, Hu Weijia writing for Chinese prestigious newspaper Global Times stated on 8th April, “While it is hard to win a trade war with punitive tariffs, it is more difficult to protect people from feeling pain in the fight. In the US, some interest groups such as steel companies benefit far more than others from trade protectionism, while the trade disputes potentially hurt exports of US farm products. Because of an uneven distribution of interests, US society is likely to be more and more split in its attitude to the trade war with China, making the trade war very costly for Trump. If unfair action is taken by the US, China has various tools to use as countermeasures. Meanwhile, China is expected to be fully prepared for the escalation of trade friction by strengthening its ability to safeguard Chinese entities targeted by the US. In an all-out trade war, offense and defense are equally important to winning”.

As reported by Washington Post on 8 April, many of farmers who helped propel Donald Trump to the presidency fear becoming pawns in his escalating trade war with China, which threatens markets for soyabeans, corn, and other lifeblood crops in the upper Midwest. With China threatened a 25% tariff on soybeans, one farmer Mr Mike Petefish, who grows the crop over 2000 acres, feared the worst. Soybeans are a 2 Billion dollars business in Minnesota. China is also largest importer of pork meat and if she decides to put a ban on pork it could hit the US pig farms in a big way. An interesting comment under the article was, “maybe the Saudis will buy our soybeans”.

The US bread basket of Corn and Soybean spreads over vast tracts of lands in Iowa, Illinois, Indiana, southern Michigan, western Ohio, eastern Nebraska, eastern Kansas, southern Minnesota and parts of Missouri, South Dakota, North Dakota, Wisconsin and Kentucky. Most of these states are also Republican strongholds and voted for Trump in last presidential elections

While Trump contemplates trade wars, others are already filling the vacuum in soybean market of China which accounts for 64% of total global consumption , as reported by Reuters, Brazil sold 2.07 million tonnes of beans to China in January this year, up 720 percent from a year ago and equivalent to just under a quarter of the total.

On the ‘hot wars’, Trump is fighting on multiple fronts, including domestic one against American establishment. Syria is an interesting case where Trump’s announcement for a pull out few days ago was challenged by a new development of an alleged Chemical attack by Syrian Government forces against civilians, this development was further complicated by a mysterious missile attack on Syrian forces, most probably by Israel, thickening the crises and pulling the US back into Syrian quagmire.

Trumps firing of top job holders of White House and their replacements have created a warmongering cabinet of likes of John Bolton, who are now ready to unleash the next phase of endless wars. It appears that the Fox cabal has taken over the White House. Peaceniks are on the retreat and Capitol hill is paralyzed against a POTUS who is hell bent on saying “If I don’t survive, everyone can go to hell”.

Korean crises still remains far from being resolved, Iran and the Gulf region waits for what John Bolton may have up his sleeves, and, Afghanistan peace process is just picking up the pieces from the devastations of a prolonged war, with no winners.

Russia, Turkey and Iran have recently held high level meetings and consultations to stem the tide of chaos in the Middle East and may be the biggest challenge to John Bolton, who according to the Guardian newspaper, is an unwavering and radical advocate of war against both North Korea and Iran and is going to oversee Trump administration’s national security policy. Bolton has repeatedly argued, nuclear disarmament in both cases(Iran and North Korea) will be best achieved through regime change delivered by US military might.

I will end the piece with the observations of Professor Andrew Bacevich from Boston University (author of a book, The Limits of Power and the End of American Exceptionalism), who identified the three challenges facing the US, “the economy, in remarkable disarray, can no longer be fixed by relying on expansion abroad; the government, transformed by an imperial presidency, is a democracy in form only; and U.S. involvement in endless wars, driven by a deep infatuation with military power, has been a catastrophe for the body politic. These pressing problems threaten all of us, Republicans and Democrats. If the nation is to solve its predicament, it will need the revival of a distinctly American approach: the neglected tradition of realism”.

 

n          The author is a freelance journalist.