U.S. President Donald Trump has begun his assault on the global trade system. After promising to end the exploitation of the United States by its trade partners, the Trump administration was slow to take concrete steps to honor that pledge. In recent weeks, however, the U.S. has acted with gusto and the president seems to relish the prospect of a trade war. This is foolish bravado. There are no winners in a real trade war. Unfortunately, Trump is not completely wrong: The international trade order is not perfect and must be fixed. His approach, however, is misguided and dangerous.
One of the pillars of the Trump presidency is that the world trade system has been abused by countries who take advantage of the U.S. His promise to end the abuse and reinvigorate U.S. manufacturing was, noted Trump last month, "probably the main reason" he was elected. The evidence that Trump uses to make his case is flawed, though. The bilateral trade balance in goods is not proof of that charge.
Trump has peopled his administration with like-minded economists and policymakers (and driven off those who dissented) and after a year of preparation, he launched the opening salvo in his effort to "fix" the U.S. trade balance in early March by announcing tariffs on steel and aluminum imports.