Trade wars in the making
Just as United States President Donald Trump and North Korean leader Kim Jong-un are coming out of what some say is a successful first meeting to diminish the prospects not just of a ground war in the Korean Peninsula but a nuclear exchange which may engulf East Asia and other areas, another war is percolating.
While this battle may not involve ground forces and the firing of deadly weapons, it promises to be as destructive and possibly more expansive than we can imagine. We are talking here of an imminent trade war among the members of the G-7, a grouping of the world’s most advanced Western economies led by the US, which will definitely suck in the entire global economy in its wake. Such a scenario has become a real possibility over the weekend after that acrimonious exchange between President Trump and Canadian Prime Minister Trudeau at the end of the G-7 summit in Quebec.
Unprecedented was how most observers described that exchange which led to the US’ decision not to sign the summit’s communiqué despite last-minute entreaties from the leaders of Germany, France, UK, Italy and Japan, all of whom were shown talking to President Trump as if pleading with him not to abandon the agreements made during that meeting no matter how vaguely worded these maybe.
Even as he was up in the air en route to his historic meeting with North Korean President Kim Jong-un, leaving the weekend summit earlier than the other leaders, President Trump angrily directed the economic team he left behind not to proceed with the signing of the communiqué in his behalf. Apparently, he was incensed by the statement of Canadian Prime Minister Trudeau that “Canada will not be pushed around” as far as trade with its bigger neighbor is concerned. He was going to impose tariffs on a variety of US goods entering the Canadian market after Trump earlier threatened to impose tariffs on steel and aluminum and specifically with Canadian exports to the US of automobiles and dairy milk, among others, saying he had to protect American farmers, workers and companies from the influx of such goods.
Trudeau, the boyish Canadian leader, was not about to take the same sitting down. He was quoted as having said in that press conference after the summit that “...all of the member nations, including the U.S., had signed a communique pledging to lower tarifafs and other trade barriers...” adding “...it was kind of insulting” that the U.S. had imposed tariffs on steel and aluminum under the guise of national security, noting Canadians stood “shoulder to shoulder” with Americans in overseas wars.
That belated Trudeau press conference really got Trump all riled up. Accusing Trudeau of making false statements and even branding him as “meek and mild,” meaning he never contradicted him in their conversations, he virtually upended what to the other leaders was a cordial though sometimes testy gathering. What made matters worse was the follow-up statements of members of the Trump economic team.
Peter Navarro, the trade adviser and Larry Ludlow, another economic adviser made the rounds skewering Trudeau to high heavens in what the other leaders thought was a very crude, undiplomatic assault on a colleague. It was truly a sad spectacle. “There’s a special place in hell for any foreign leader that engages in bad-faith diplomacy with Donald J. Trump and then tries to stab him in the back on the way out the door,...That’s what bad-faith Justin Trudeau did with that stunt press conference. That’s how weak and dishonest Justin Trudeau is,” Navarro, the trade adviser said.
Saying the Canadian leader should have thanked the president for even showing up before a Singapore summit with North Korean dictator Kim Jong-un, Navarro interjected that “..all Justin Trudeau had to do was take the win...as Trump had “bigger things on his plate” and was willing to sign a “socialist communique” at the G-7 summit but had to back out after Mr. Trudeau’s press conference...”
Of course, Trudeau took all of those insults in good stride and proceeded to prepare Canada for the war ahead as what the other leaders apparently are coming up to given the seemingly unrestrained efforts of Trump to disrupt, as it were, the present order of things.
Given the mood of the moment there is no denying that indeed we are in for some rough times, a situation which some observers are now saying may lead to a long and ultimately disastrous global economic downturn. Some are now talking about the infamous Smoot-Hawley Tariff Bill passed by the US Congress in 1930 which “..helped bring on the Great Depression...by accelerating the contraction of global trade..”
No less than senior members of the Council of Economic Advisers reporting directly to the US President have warned that tariffs will indeed cut growth. Respected members of academe have also chimed in echoing the same theme. The Organization for Economic Cooperation and Development has come out with an economic model predicting positive outcomes if nations around the world reduce instead of increasing tariff levels. Said the OECD Secretary-General, Angel Gurria, in an interview “...we regret the proliferation of tariffs announced all over the world..we believe they are a threat to global recovery...”
Indeed at a time when global recovery remains iffy as in the period after World War I and before the Great Depression, there is so much unease with the increasingly isolationist measures which President Trump has been pursuing since he took office. The thinking and even the words coming out of the Trump White House eerily resemble those of the US government before the economic slide in 1929 which prompted the signing of the Smoot-Hawley Tariff Act.