Another reason this trade war is not “good and easy to win” - China has a lot more recent experience in cheating.

Trump thinks he has the upper hand in a trade war with China because the US imports so much more from China than China does from the US. So he has so much more scope to impose tariffs than China does. But overlooking the fact that bilateral trade deficits are NOT inherently a problem, Trump is overlooking three key facts:

1.       China has significant potential for non-tariff barriers against the US companies in China including unplanned inspections, delays in approving licenses, M&As and financial transactions, additional regulations, and other administrative headaches, etc. 

2.       If Trump keeps alienating his allies in the EU, Canada and Mexico, there are a whole bunch more US exports they can slap tariffs on too (including countries with whom the US has bilateral trade surpluses and therefore, according to Trump’s own logic, strategic disadvantages); and

3.       As I’ve recently come to realise, currency manipulation. 

China hasn’t officially been listed as a currency manipulator for years now (despite Trump’s claims to the contrary). Officially they now essentially have a market-based exchange rate. But this could easily change. They have precedent. They have a history of undervaluing their currency so it wouldn’t be hard to do it again. And this would offset any impact of US tariffs on Chinese exporters. 

For the US to do the same, Trump would have to successfully pressure the Federal Reserve to start targeting the exchange rate instead of the inflation rate - a drastic and frankly unthinkable change in the Fed’s mandate (far more drastic than for China’s central bank). No president was supposed to even THINK it, let alone say and do it!

An independent central bank is a key and crucial institution in the US’s economy (with global impact greater than any other). It has been demonstrated that politicians simply can’t be trusted with control over interest rates and the supply of money. So presidents have traditionally respected their independence. Most were too afraid to even COMMENT on Fed policy, lest it be construed as undue political influence over an independent body.

Not Trump though. He’s criticised Fed decisions publicly both before taking office and this last week.

But even if he is reckless enough to try taking back the Fed, China already has a head start. You really want to challenge China to a game of “let’s manipulate the markets”? Girl, please!

China is harder to beat than you think, Trump. And the way you’re treating your friends, they may not be on your side either. And you can’t beat the whole world!