The West Will Die So That Trump Can Win

America created the postwar order by delaying immediate economic gratification. Those days are over.

German Chancellor Angela Merkel and Canadian Prime Minister Justin Trudeau attend a panel discussion titled 'Launch Event Women's Entrepreneur Finance Initiative' on the second day of the G20 summit on July 8, 2017 in Hamburg, Germany. (Ukas Michael - Pool/Getty Images)
German Chancellor Angela Merkel and Canadian Prime Minister Justin Trudeau attend a panel discussion titled 'Launch Event Women's Entrepreneur Finance Initiative' on the second day of the G20 summit on July 8, 2017 in Hamburg, Germany. (Ukas Michael - Pool/Getty Images)

“Just another #G7 where other countries expect America will always be their bank,” tweeted U.S. National Security Advisor John Bolton on June 9, following the unprecedented failure of the rich-nation summit to produce a joint communique. “The President made it clear today. No more.”

The degree of personal vitriol directed by U.S. President Donald Trump and his team toward their host, the Canadian prime minister, was even more remarkable. Trump called Justin Trudeau “dishonest & weak” on Twitter. There is, White House trade advisor Peter Navarro told Fox News, “a special place in hell” reserved for him.

That such language should be directed at an ally is difficult to explain by reference to economic policy or facts. Yes, as Trump has said repeatedly, Canada imposes large import tariffs on milk (as the United States does on sugar). Yet dairy is a trivial portion of U.S. exports to Canada, less than 0.2 percent, and the United States exports northward more than twice as much dairy as it imports. Moreover, the average U.S. tariff rate, at 1.6 percent, is twice Canada’s, and the United States runs a trade surplus with it.

Examining Trump’s latest tariffs on steel, aluminum, washing machines, and solar panels, however, I find that Canada is by far the hardest-hit nation. Over $12 billion in Canadian exports have been targeted. And the European Union is No. 2, at just under $8 billion.

What about China, a vastly more serious transgressor of trade rules and norms? Trump has targeted only $3.5 billion of its goods — less than half that of the EU, and only a quarter that of Canada. To French President Emmanuel Macron’s suggestion that the G-7 collaborate on the “China problem” of steel subsidies, intellectual property expropriation, and the like, Trump reportedly replied that the EU was “worse than China” on trade.

Two generalizations may reasonably be drawn. One is that the Trump administration is not making trade policy based on economic facts. It could be doing so haphazardly, but it would appear more likely that it is sending a message to long-standing allies that business as usual is over. It is notable that Trump reportedly rejected text in the G-7 draft communique referring to “the rules-based international order,” which the United States created in the four years following World War II. The second generalization, then, is that Trump is targeting allies for punishment and abuse because he is trying to rupture their mindset — the mindset that the United States values this order more than it does the opportunity to boost net exports.

To understand this mindset, we need to go back to 1947. In August of that year, the United States had representatives in Geneva negotiating the creation of an International Trade Organization and representatives in Paris negotiating terms for European participation in the Marshall Plan. In Geneva, Undersecretary of State for Economic Affairs Will Clayton was at loggerheads with British Board of Trade President Stafford Cripps over the latter’s defense of imperial trade preference — privileged British access to the markets of its colonies and dominions. Cripps insisted that concessions were “politically impossible” while Britain was in the midst of a sterling crisis. An angry Clayton tried to persuade Secretary of State George Marshall to conclude an International Trade Organization agreement without Britain if it continued to show “callous disregard” for its liberalization commitments. The United States must, his colleague Clair Wilcox insisted, have “a front-page headline that says ‘Empire Preference System Broken in Geneva.’” Marshall aid and U.S. tariff cuts, he argued, were “bargaining weapons that we may never possess again.”

But U.S. President Harry S. Truman, with Marshall’s support, rejected this approach, fearing that a public rift between London and Washington would be exploited by British Labour left-wingers and the Kremlin, resulting in new security problems in Greece and Italy while undermining U.S. congressional aid support. “An open breach with the U.K.,” the U.S. economic affairs counselor in London, Harry Hawkins, cabled Clayton, “will hurt the Marshall plan more than [Britain’s] failure … to give substantial elimination of preferences.” Thus what was seen by the Clayton camp in Geneva as a “weapon” to extract trade concessions from the British — Marshall aid — was seen back in Washington as precious leverage to be preserved for facing down the Soviets.

This perspective persisted through the four decades of the Cold War. In the 1980s, U.S. President Ronald Reagan saw the G-7 first and foremost not as an economic bargaining forum but as a vehicle for coordinating Western strategy toward Moscow. The 1983 summit in Williamsburg, Virginia, for example, clinched a historic deal to station U.S. cruise and Pershing missiles in Europe.

Fast forward again to 2018, and it is not surprising that a U.S. administration no longer sees an overriding political need to restrain itself from pushing allies into making trade concessions. The Soviet Union no longer exists. To the extent that the administration’s detractors argue that its demands are unreasonable, or that the United States has bigger fish to fry — like maintaining solidarity in the face of Russian aggression — Trump’s response would presumably be twofold. First, a better deal is always better — “reasonable” is for chumps. Second, if geopolitics stand in the way of the United States getting better trade deals, then geopolitics should give way. Americans don’t care about Crimea; they don’t care about the abstractions of democracy. They care about winning trade wars.

To the extent that these two things are true, at least to the average American, Canada and the EU have a bigger problem than they realize. Their strategy at the moment, reflected in tempered responses to Trump, is to wait him out — on the assumption that he will be gone in two and a half years, or less, and that the United States will then go back to normal. But Trump may be the new normal — not in the sense that future presidents will be as crude and loose with the facts, but in the sense that they, reacting to a seismic shift in U.S. public sentiment, will no longer recognize the constraints of solidarity with fellow free-market democracies. Those days are, perhaps, as Bolton would say, “no more.”

Benn Steil is director of international economics at the Council on Foreign Relations. Twitter: @BennSteil

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