President Trump could be about to make the worst single decision of any president during my lifetime, and that includes the presidency of Richard Milhous Nixon. If Trump follows through and starts a new round of much more significant tariffs against Chinese products tonight, he could begin unraveling the relationship that has been developing for 40 years. It will not be “easy,” in his words, to win against a dug-in Chinese leadership. There is no question but that they will retaliate.
New tariffs won’t achieve the goal of reducing China’s race for technological independence. In fact, the Chinese will conclude they are running out of time to achieve that self-sufficiency and intensify their efforts.
The shockwaves of tariffs will reverberate throughout the American economy, including the stock market. So many American manufacturers either import components or export components that CEOs will have to scramble to re-examine their global supply chains. Retailers like WalMart and Home Depot that buy extensively from China will have to either raise prices or find alternatives. The stocks of companies with extensive sales in China such as Intel, General Motors, Microsoft, Qualcomm, Cisco and others will take a beating.
Tariffs are a blunt instrument that are dangerous because other nations, including China, will impose tariffs on very specific American goods. They will try to make it hurt, particularly the people who voted for Trump.
The reason no one has taken tariffs seriously for 30 or 40 years is that they are stupid and dangerous except for a handful of cases. Yet Trump persists. Does he have any real understanding of how the global economy functions in a way that has raised the boats of entire nations and many peoples? Of course not. He’s acting on the basis of convictions as baseless as thinking that charming Kim Jong-Un in Singapore would cause him to give up his nuclear arsenal within a year.
It will be very difficult, perhaps impossible, to back out of a tariff tit-for-tat confrontation. Trump apparently believes he will merely escalate. This way lies madness.
