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Opinion What will it take for Trump to pull back from the brink with China?

U.S. tariffs on foreign goods keep climbing. They are higher than at any time since the 1960s.

This week, the trade war with the world’s other leading economy, China, worsened as yet more U.S. tariffs were levied, raising the average tax on Chinese goods to 21 per cent. It was only 3 per cent when Donald Trump entered the Oval Office.

China, of course, has been responding. To use one example, it’s imposing a 33-per-cent tariff on U.S. soybeans, compared with just 3 per cent on soybeans from Brazil and Argentina.

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U.S. companies have not been readily passing on costs to customers, but this is set to change as the new tariffs target consumer goods from China such as TVs, shoes, sporting goods, meat and dairy products. JPMorgan Chase predicts Trump tariffs will cost the average American household US$1,000 a year.

Over recent months, the global giants seemed to be edging closer to a new trade accord. With so much at stake, there was confidence it would happen. But the sides have grown further apart, and the conflict is reaching the stage where it will be harder to pull back. The question is: which side will blink? The fear is that neither will.

The commonly used term “trade war” barely does this one justice. This titanic confrontation has too many potentially alarming consequences. It seriously imperils continued U.S. economic growth and global economic stability. Instead of peaceful co-existence, it could set the world’s two major powers on a collision course that goes beyond economic issues. The long march toward global free trade could be set back immeasurably by the new U.S. isolationism. Canadian relations with China, as we have seen in the Huawei controversy, risk further damage. Mr. Trump’s re-election prospects could very much hinge on a deal with China.

Meanwhile, Washington plunges headlong, purposefully and needlessly into this conflict. It’s not enough that the impetuous President has created so many divisions at home. There has to be rupture abroad as well.

Trade experts agree that the U.S. had good reason to tackle injustices in its trade with China. But to carry it to such extremes makes no sense. Not when the U.S. economy has been humming along so nicely. Not when it’s the best argument Mr. Trump has for re-election. Not when the global economy is already weakening.

The rest of the world looks on helplessly. At the recent meeting of the Group of Seven in Biarritz, France, the leaders basically let the issue pass. Instead, they pressured Mr. Trump on the far less important matter of his wish to readmit Russia to the G7. They made an effort, led by French President Emmanuel Macron, to bridge the Trump conflict with Iran. They staged a session on climate change that Mr. Trump did not even bother to attend. But on China, the most important question of our time, timidity ruled.

The leaders cowered because Mr. Trump intimidates them. Dealing with an irrational actor has a paralyzing effect. He demonstrated to them at the G7 summit in La Malbaie, Que., last year that, if challenged, he’s prepared to walk away.

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With China, Mr. Trump has zigzagged, calling President Xi Jinping an enemy one minute, a great leader and brilliant man the next. No one knows which way he will turn. “Sorry,” he told reporters at the Biarritz summit. “It’s the way I negotiate.”

To find a time when the U.S. was acting more recklessly on trade one has to go back all the way to the 1930s and the days of the Smoot-Hawley tariff. Everyone knows the wreckage it caused, perhaps even Mr. Trump.

He’s convinced that his tariffs are working – that they are more damaging to Chinese interests than U.S. interests and that Beijing will have to relent and make a deal. Some investors think China is being hurt badly in the trade war. Others believe it will weather the storm until Mr. Trump faces the music at the ballot box next year.

As his support numbers decline, maybe Mr. Trump will come to his senses and make a deal. He did this with the renegotiated NAFTA, relenting on some of his original hard demands to get an agreement. He then declared total victory nonetheless.

This looks to be the best possible chance of pulling back from the abyss with China. Although Mr. Trump is a firm believer in protectionism, it’s to be hoped that the prospect of political ruination will compel his return to trade sanity.

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