Paul Krugman: And the Trade War Came

Trade war. What is it good for?:

And the Trade War Came, by Paul Krugman, NY Times: Donald Trump got ... overwhelming support from white working-class voters. These voters trusted his promise to bring back good manufacturing jobs while disbelieving his much more credible promise to take away their health care. They have a rude shock coming.

But white workers aren’t alone in their gullibility: Corporate America is still in denial about the prospects for a global trade war, even though protectionism was a central theme of the Trump campaign. ... The ... relevant legislation gives the occupant of the White House remarkable leeway should he choose to go protectionist. ...

Oh, and don’t expect attempts by experts to point out the holes in this view ... to make any impression. Members of the Trump team believe that all criticism of their economic ideas reflects a conspiracy among think tanks that are out to undermine them. ...

There will be retaliation, big time. When it comes to trade, America is not that much of a superpower...

And retaliation isn’t the whole story; there’s also emulation. Once America decides that the rules don’t apply, world trade will become a free-for-all.

Will this cause a global recession? Probably not — those risks are, I think, exaggerated. ...

What the coming trade war will do, however, is cause a lot of disruption. Today’s world economy is built around “value chains” that spread across borders: your car or your smartphone contain components manufactured in many countries, then assembled or modified in many more. A trade war would force a drastic shortening of those chains, and quite a few U.S. manufacturing operations would end up being big losers, just as happened when global trade surged in the past.

An old joke tells of a motorist who runs over a pedestrian, then tries to fix the damage by backing up — and runs over the victim a second time. Well, the effects of the Trumpist trade war on U.S. workers will be a lot like that.

Given these prospects, you might think that someone will persuade the incoming administration to rethink its commercial belligerence. That is, you might think that if you have paid no attention to the record and character of the protectionist in chief. Someone who won’t take briefings on national security because he’s “like, a smart person” and doesn’t need them isn’t likely to sit still for lessons on international economics.

No, the best bet is that the trade war is coming. Buckle your seatbelts.