No one can “win”, beyond bragging rights, any war, but especially not a trade war. Both parties will realize lowered economic output and higher prices for the goods traded, which is the macroeconomic definition of inflation.
Trade is always a washout in terms of value/price, but the US gains more from trade because we literally pull dollars out of our backsides and we get real goods, made with real resources and labor, for those dollars. We also forego the resource depletion and pollution cost inherent in manufacturing.
Trump obviously has some hard right-wing Chicago School people advising him. Those are people who refuse to adopt the concept of fiat currency with a floating exchange rate in some hope of preserving the conservatism/austerity that goes along with the gold standard stupid they are stuck in. In that gold standard world, tariffs would level price differences and pay down any debt, or accumulate surpluses, making it possible for us to spend more.
With no hard restraint on government spending, they only pull money out of the economy (all taxes are destroyed, not respent, by accounting entities) and make goods more expensive without adding any productivity. They also don’t address any of the primary complaints leveled against China, such as copyright/patent infringements except as a punitive measure that is easily reciprocated.
Any problem associated with global trade is the fault of our own system that demands that business be the only means of distribution of wealth, and the concept that all government spending must be “paid for” via taxation or borrowing. Simply creating and distributing the nation’s currency to consumers equal to wages lost to foreign trade would have prevented most of the disruption we have experienced since we became a net importer. It really makes little difference who makes the products as long as the worker has the purchasing power to buy them.
Instead, American style capitalism used the offshoring of production to gain an advantage over labor, mindless of the fact that labor is also its customer base. If there is enough slack in our economy to afford spending to offset the tariffs then that slack was always a factor that kept our economy well below optimum productivity, with or without tariffs. We simply don’t provide enough fuel (deficit spending) to maintain a healthy economy.
Considering that our fiat currency makes anything that is for sale priced in dollars “affordable” without incurring inflation, including any excess labor that the private sector rejects, it isn’t hard to see that our current thinking about economics is not our economic reality and will fail on a regular basis as the conflicts accumulate. It will probably require a deeper recession than we experienced in ’08 to force this rethinking, and I worry that this ego-driven tariff war Trump has embarked on may bring the tipping point for such a recession, which we are far less prepared for than we were in ’08 after the forced austerity that conservatives have clamored for and now finally achieved.
Safety nets have never been about helping “people”, but about preserving supply chains that can easily collapse domino style in business cycle downturns if sufficient government created money isn’t injected at the bottom to shore them up. The right has used voter ignorance and envy to vilify such spending via a fear campaign over deficits and the debt. Masquerading as anti-tax, they promote the 100% tax rates of balanced budgets. This effectively steals resources from the private sector by minimizing the available currency required to net retire private debt or act as a store of value in commerce. Their goal is not capitalism. It is a return of feudalism.
