Will Trump’s tariff war alter the balance of economic power? | Mohamed El-Erian

While it has sizeable risks, the US battle with China could open the door to a new era

The latest round of tit-for-tat tariffs by the United States and China has intensified the global debate about whether the world is facing a mere trade skirmish or heading rapidly toward a full-blown trade war. But what is really at stake may be even more fundamental. Either accidentally or by design, Donald Trump’s administration may have paved the way for a “Reagan moment” for the international trade regime.

In the 1980s, Ronald Reagan initiated a military spending race with the Soviet Union that ended up altering the global balance of power in ways that affected many countries worldwide. Today, Trump has launched a tariff race with China, an economic superpower, perhaps with similarly far-reaching potential consequences. Like under Reagan, the US is better placed to win the current competition with China – but the risks are sizeable.

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The Trump administration will need to avoid actually pushing other countries (especially China) too hard too soon

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Read the original at Economics | The Guardian.