World Economy

Trump’s Endgame a Puzzle

A US cargo ship at the Yangshan Deep-Water Port, in Shanghai in April.A US cargo ship at the Yangshan Deep-Water Port, in Shanghai in April.

The US is locked in a multi-front battle with virtually every major trading partner, in an effort to extract concessions that it expects to help cure the “twin deficits” that have bedeviled the world’s largest economy for decades.

On Friday, negotiations on a new North American Free Trade Agreement hit an inflection point. Talks between the US and Canada hit an impasse, with talks set to continue next week. Yet President Donald Trump has made clear he plans to strike a new deal within 90 days—with or without the US’s Canadian partner, CNBC reported.

Percolating in the background is the growing likelihood that the US will impose an additional $200 billion worth of tariffs on China as early as next week, Bloomberg reported on Thursday.

It all raises the question of what Trump’s endgame could look like, if the mere threat of a global trade war becomes an actuality. Economists and investors have been sweating over the consequences for the world economy if the US can’t reach a consensus with major economies like Europe, Canada and particularly China.

According to some economists, at the heart of Trump’s thinking about the trade war lie two key assumptions: That the world’s largest economy can narrow both its burgeoning deficit by renegotiating commercial ties with its major trading partners, and that tariffs can help accomplish these goals—by at least forcing countries to the bargaining table.

In early August the president hinted as much himself, when he declared that his menu of tariffs were working “big time”. He raised eyebrows by claiming that tariffs could somehow pay down the federal debt, which currently stands at more than $21 trillion.

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