Where Will A Trade War Take Us?

The damage from Trump’s disruptive policies will take years to repair.

- Peter Coy

Is President Trump a blip? A brief aberration who will have no lasting impact on international relations? A tempest in a samovar? Don’t count on it. In a matter of days the president has instigated a trade war, insulted the leaders of numerous allies, thrown NATO into shock, labelled the European Union a foe, and held a remarkable press conference with Russian President Vladimir Putin on July 16 in which he endorsed Putin’s suggestion that Russian intelligence agents could help the U.S. sort through allegations that Russians meddled in the election that brought Trump to power.

There are two reasons to expect that Trump’s impact on the world order will be lasting. One is that his actions are eroding trust among both allies and rivals. Once gone, trust is hard to reestablish, even if the next president turns out to be a devoted internationalist. The other is that he is pushing a boulder downhill—the boulder, of course, being nationalism. Like the politicians behind Britain’s “leave” campaign, he’s both harnessing and amplifying powerful emotions that tend to drive countries apart and keep them apart. “The populist sentiments for isolationism and protectionism in the U.S. are not created by Trump,” says Lawrence Lau, an economist at the Chinese University of Hong Kong. “He has merely exploited them very effectively.”

That makes Trump a big problem for Big Business. U.S. corporate leaders soft-pedaled their criticisms of his trade policies in the past because they hoped he’d come around to their point of view. And they were grateful for his strong support on two other key priorities: tax cuts and deregulation. Now they worry that waiting for the squall to pass may be a mistake because real damage could be done in the meantime.