Chill everyone. The wild gyrations in global financial markets are all part of Donald Trump’s master plan.
The U.S. President suggested Monday that his recent befuddling and contradictory comments about the U.S.-China trade war are intentional.
“Sorry, it’s the way I negotiate,” Mr. Trump told reporters as the Group of Seven summit concluded in Biarritz, France. “It’s done very well for me over the years.”
So there you have it. The craziness of the past week – and the past two-plus years, for that matter – is all part of a carefully scripted plan.
But to what aim?
Canada, and much of the rest of the world, desperately needs predictability – to trade, invest and prosper.
Prime Minister Justin Trudeau made a point of highlighting Canada’s role in “bringing more certainty to the global economy” as he prepared to leave Biarritz.
The contrast between the two leaders says a lot about what’s wrong with the global economy.
The United States has gone from a stabilizing force in a world of troubles to a dangerous new source of uncertainty. And for that, we can thank Mr. Trump.
Nowhere is this more evident than on the trade front. Mr. Trump now insists that China wants to restart trade talks, even as the world’s two largest economies prepare to boost tariffs on almost everything they buy from each other.
“I think we’re going to make a deal,” he predicted.
But it’s still early in the week. The mood could easily change on Tuesday, or any other day, as long as Mr. Trump remains in the White House.
There is no evidence that the United States and China are any closer to resolving any of the fundamental issues that the U.S. insists are at the root of the trade war, such as China’s use of heavily subsidized state-owned enterprises as tools of economic imperialism and unfair restrictions on what foreign investors can buy in China.
Mr. Trump may think he’s doing “well” on trade with his volatile negotiating style. The evidence suggests otherwise.
He spent the first half of his presidential term sparring with U.S. allies – friends who could have helped him put pressure on China to change its ways.
Meanwhile, the modestly reworked free-trade deal with Canada and Mexico remains in limbo, stalled by partisan fighting in the U.S. Congress. And free-trade talks with the European Union aren’t going anywhere fast, complicated by uncertainty over Brexit.
Along the way, U.S. tariffs – and threats of more – complicated these and other negotiations, needlessly exacerbating uncertainty on all sides. And that’s in dealings between close friends and allies.
The same goes for the Trump administration’s relentless attacks on the World Trade Organization. The U.S. has apparently lost interest in using the arbiter of global trade to change Chinese behaviour.
And then there is the tentative trade agreement between the U.S. and Japan, announced on the eve of the G7 meeting. U.S. farmers, hit hard by the trade fight with China, desperately wanted this deal, in part because of Mr. Trump’s own missteps.
One of the U.S. President’s first major foreign moves after taking office in 2017 was to abandon the Trans Pacific Partnership, or TPP (since renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership). The other 11 countries, including Canada, went ahead with the Pacific Rim deal without the United States. Among other things, the agreement lowered tariffs in the massive Japanese market, particularly for agricultural products, giving farmers in Canada, Mexico, Australia and New Zealand a competitive edge.
U.S. farmers found themselves on the outside, looking in, just as China was slapping new tariffs on their exports.
Meanwhile, the U.S. pullout from the TPP undermined the goal of setting trade rules in Asia, including in areas such as intellectual property. And forget the notion of creating a counterweight to China’s growing economic clout. Without the U.S., the TPP is a much weaker rival trading bloc to China.
So don’t misread Monday’s relative calm in financial markets as a sign that the worst of the trade war is over between China and the U.S.
The world is a much more dangerous and uncertain place than it was in 2016, in spite of Mr. Trump’s insistence to the contrary. A global recession lurks out there somewhere as rising protectionism slows growth and throttles business investment.
The U.S. has become a source of chaos in a world craving stability.
Mr. Trump is unapologetic for that, and far too few Americans seem to care.