The Weapons of a Modern-Day Trade War

Let’s not sugarcoat it anymore. The U.S. and China are in a trade war. Two weeks after President Trump imposed broad tariffs on imports of steel and aluminum from China and other countries, he started the process of slapping punitive duties on tens of billions of dollars of Chinese imports and restrictions on Chinese investment in the U.S. In Beijing, President Xi Jinping was quick to retaliate, hitting U.S. exports of nuts, pork, and other products with tariffs and warning tougher measures could come. The Chinese Embassy in Washington, in a formal statement, pledged the country would “fight to the end.”

Economists and Wall Street bankers are providing estimates of what a trade war would cost in economic growth, jobs, and corporate earnings. But the bigger, long-term consequences are harder to forecast. Perhaps this trade war will be resolved through negotiations, as U.S. Commerce Secretary Wilbur Ross, an architect of Trump’s policy, has suggested. Talks between the two sides already appear to be under way, behind the scenes and without the hyperbole. The crisis might dissipate into a big nothing, with Xi tossing a few concessionary crumbs at an impatient and inconsistent Trump, who may prefer quick, tweetable wins to the hard work of changing the Chinese trade practices that really threaten U.S. business.