Many posts have dealt with tariffs and trade.
Originally published in La Tercera as “Los aranceles de Trump: El final feliz.”Trump's trade war has two possible endings. One would be happy. The other could be terrible.
The happy ending would look like the following. China and other nations make minor concessions on trade policy. In return, Trump drops all of the tariffs that he recently imposed. Everyone declares victory, and the global economy returns to normal.
That ending would be consistent with Trump's character. In business, politics, and even golf, he has often pretended to have won contests that he actually lost.
This ending would benefit him politically. His devoted followers believe everything he says, and he could easily convince them that a surrender is a triumph. Other Americans would dismiss his claim of victory, but would be glad to see the trade war come to an end.
The happy ending has to come soon. The longer Trump waits, the more harm he will do to the economy. At some point, the losses will be hard to reverse.
If Trump continues the trade war, Americans will suffer. He keeps suggesting that other countries pay his tariffs. In reality, American importers pay them and pass the cost to American consumers. The result of a prolonged trade war will be inflation. Even worse, economists are predicting that it will lead to a recession.
During bad economic times, the party in power always loses ground. If the 2016 congressional elections occur during a recession, Trump's Republican Party will surely lose its narrow majority in the House of Representatives, and might lose control of the Senate. Democrats will use their newfound power to thwart Trump's policies and investigate his administration. His presidency will end in failure and humiliation.
If Trump is as smart as he claims to be, he will choose the happy ending. But to quote one of his favorite phrases, we'll see what happens.
