The time has come to rewrite the rules so that the world’s largest economies are able to trade peacefully
Donald Trump has been an opponent of free trade deals all his public life. A protectionist message was central to his run for the White House. On the campaign trail he promised “reversing two of the worst legacies of the Clinton years”: railing first against the North American Free Trade Agreement, Nafta, and second against China’s entry into the World Trade Organization. His bluster led to a new trade agreement brokered with Canada and Mexico, although it is unclear whether the changes achieved were little more than cosmetic. Unburdened by modesty or honesty, Mr Trump hailed his “new Nafta” agreement as “truly historic”.
Having decided “trade wars are good, and easy to win”, the US president has for months been on course for a battle with Beijing. The trouble is that China is not a Mexico or a Canada, which appear prepared to feign a defeat for a quiet life with a bigger bully. China is a pugilistic power, led by its most powerful leader in decades, intent on recovering global respect. That might explain why, on the cusp of a deal between Washington and Beijing, China tore up the negotiating text that both countries had been using as a blueprint for a sweeping trade pact. In retaliation, the US imposed higher tariffs on $200bn worth of Chinese goods, sparking fears for a full-blown trade war. Global trade could decline by 2%, with GDP slowing by 0.8%.