Trump thumbs his nose at global trade

The reaction against Donald Trump's new steel and aluminium tariffs has been widespread, "fast and negative", says The Wall Street Journal. Roberto Azevedo, director-general of the World Trade Organisation (WTO), warned that "an eye for an eye will leave us all blind, and the world in deep recession", while key allies including the EU and Canada have threatened to retaliate.

The move put him at odds with Treasury Secretary Steven Mnuchin and his top economic adviser Gary Cohn, who resigned over the issue on Tuesday night, say Shawn Donnan and Sam Fleming in the Financial Times. Congressional Republicans, led by House Speaker Paul Ryan, who warned Trump in person of the economic dangers of a trade war and a political backlash that could "crush" the Republicans in the mid-term elections, have been making an "11th-hour push" to walk Trump back from the brink, report Rachael Bade, Burgess Everett and Doug Palmer in Politico.

Getting ready for battle

Yet Trump is unrepentant. On Friday he tweeted that "trade wars are good, and easy to win" and on Monday added "We're not backing down." He also implied that he wants to use the tariffs as a bargaining chip in negotiations with Canada and Mexico over the North American Free Trade Agreement (Nafta), says Emily Stewart in Vox. "We have large trade deficits with Mexico and Canada," Trump tweeted. "Tariffs will only come off if new & fair Nafta agreement is signed".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Trump was given the "green light" on tariffs by Commerce Secretary Wilbur Ross and his trade specialists, notably Robert Lighthizer and Peter Navarro, both "dyed-in-the-wool protectionists" who have "never seen a tariff or quota they didn't fall in love with", says Steve Hanke in Forbes. But their belief that "tariffs and tough talk" will close America's long-running trade deficit displays "profound economic ignorance".

It does, agrees Oliver Kamm in The Times. Trump maintains the deficit is proof that America's trading partners, notably China and Germany, are "engaged in unfair trade practices". The deficit has "nothing to do with other countries' trade policies; it arises because Americans don't save much". Trump's tariffs will do nothing to increase savings.

What they will do, however, says The Wall Street Journal, is "punish American workers". Trump "seems not to understand" that American steel-using industries employ around 6.5 million Americans, while steel makers employ around 140,000. Domestic producers will simply raise their prices, with additional profits flowing to executives and shareholders that is, until those prices hurt their steel-using customers as well.

Then there's the "diplomatic damage", made worse by Trump's spurious use of Section 232 to claim a threat to national security. Such an argument is "preposterous" since China supplies just 2.2% of US steel imports. Canada that "menace to world peace" supplies 16%.

A threat to the world

Yet the "systemic impact of the US thumbing its nose at the global trading system" is the worst part of this move, says Arthur Kroeber in Gavekal Research. Trump's emboldened trade warriors may proceed to "more unilateral trade actions" such as withdrawal from Nafta or more targeted action against China.

The irony is that most other countries would have been happy to join a US-led effort to "restrain Chinese mercantilism and fight for greater market access in that highly protected economy". Now they may wonder whether it is "really China or the US that poses the greater threat to the world trading system".

Putin's nukes: aiming closer to home

"Like Blofeld, but with a larger audience", Vladimir Putin "warned the world that he could destroy it if provoked," says The Times. His state of the nation address in Moscow last week, which included an animated video in which multiple warheads were apparently heading for Donald Trump's holiday mansion in Florida, would have been comic had its subject not been so serious.

Putin claims that this system can "penetrate any anti-missile defence to strike anywhere in the world within an hour". While similar claims have been made before, there is "little doubt" that Russia has made progress. There is even less doubt that the "two former Cold War adversaries are drifting back" into a dangerous arms race.

Terrifying though it all sounds, these revelations "don't actually change the balance of power between Russia and the US in any meaningful way", says New York magazine. Even without Russia's military innovations and Trump's wish to "spend $1.2trn modernising and expanding the US nuclear arsenal", both countries "already possess enough atomic firepower" for a nuclear exchange" to wipe them both "off the map" and cause the "collapse of human civilisation as we know it". The Russian weapons we should really concern ourselves with are the ones it is already using: cyberweapons.

This speech was targeted just as much at a domestic audience, says James Cameron in The Washington Post. The first round of Russia's presidential election takes place on 18 March and, although nobody doubts that Putin will win a fourth term, "Russian officials are reportedly worried about a low turnout from an apathetic public".

With little on the domestic side likely to entice voters to the polls, Putin's "nuclear claims help bolster his established narrative that he has restored Russia's greatness after years of humiliation". He has even launched a public competition to name a new cruise missile and unmanned underwater vehicle.