Never Fight a Multifront Trade War: Why the United States Will Lose
The German high command learned a key lesson after World War I: Never fight a two-front war. That’s why Germany signed the Molotov-Ribbentrop Pact with the Soviet Union in 1939. Of course, Hitler ended up in another two-front war anyway—and, sure enough, it ended badly again for Germany.
Comedian Norm McDonald once joked about the absurdity of it:
In the early part of the previous century, Germany decided to go to war. And who did they go to war with? THE WORLD! That had never been tried before… And then about 30 years passed, and Germany decides to go to war again, and again it chooses as its enemy… THE WORLD!
Well, the same two-front dictum goes for trade wars. It’s okay to fight a single-front war, but not a war with the whole world. Nonetheless, President Trump has decided to start a trade war (never mind that China actually started it 15 years ago), and who does he choose to attack? THE WORLD!
As we saw on Liberation Day, Trump imposed tariffs on most countries, even islands with penguins, and even close allies that run trade deficits with us. The result—who could have seen this coming?—has been that the rest of the world pretty much hates us now and is beginning to plan for a post-American trading system. Japan, Korea, other ASEAN nations, and China are in talks to cooperate with each other, as are the EU and China. Canada is also looking to the EU.
Trump’s defenders say, wait a minute, we’re still the top dog, the head honcho, the boss. So, we can’t lose. The rest of the world needs us and our market.
But as Rob Atkinson writes in a forthcoming piece for Foreign Policy, the reality is that America will lose massively from this trade war...
