After President Donald Trump announced he would place tariffs on steel and aluminum to spur on growth in the American markets, several countries freaked out and promised to retaliate with tariffs of their own.
Wall Street reacted accordingly as stocks dropped over 700 points in a single day to the news that the U.S. may soon be embroiled in a trade war.
The main concern has to do with the world’s two largest economies battling it out for supremacy, which would almost certainly leave other countries destabilized and fighting for air.
While the idea of a trade war is unsettling, there’s a chance that Trump isn’t too serious about keeping tariffs up for long. Instead, he might be pushing for better negotiations on a trade deal he’s touted since the campaign trail.
It’s a tactic that has proven to work so far.
All one has to do is look at the North Korea situation. Trump’s aggressive tone had many fearing that WW3 was about to break out any moment, but instead, it brought both sides to the negotiating table. For the first time in over 60 years, the Korean War has officially ended.
In an effort to avoid a trade war with China, a war the U.S. can’t afford to have as its economy recovers from a decade-long recession, Trump has sent a team of experts to Beijing with the goal of leaving with a compromise deal that helps both sides.
Trump tweeted last week that he believes a deal will get done, but some aren’t as optimistic. His team needs to be united on the tenants of the deal to make negotiations simpler, but those he did send don’t seem to be likeminded about what needs to get done. It consists of both free trade advocates as well as trade hawks…two sides who rarely agree on anything.
Chris Krueger, the managing director of the Cowen Washington Research Group, isn’t optimistic about the deal.
“This sets up a bizarre situation where the US team may spend most of the talks negotiating among themselves. It’s hard to picture more unique Trump officials.”
Trump himself believes sending a team with diverse ideas is a great thing, but one is left to wonder, with a recovering economy, if now is not the time to leave it to chance. This is the best chance we have at preventing a trade war, so sending a team that isn’t in agreement won’t be likely to solve the problem.
At the end of the day, a trade war can send the American economy back into a recession and destroy the massive positive movement we’ve seen under the Trump administration so far.
Hopefully the president’s aggressive tactics don’t lead us down that road.