That’s a passage from a thought-provoking article at the Hill by economist John Cochrane:
One hundred and four years ago this August, the war to end all wars broke out. It was a war that nobody wanted. The world stumbled in to it almost by accident and then could not get out.
“Wars are easy to win,” leaders thought. “We’ll be in Paris (or Berlin) by fall.” They were equally wrong and equally befuddled once the trenches filled with bodies.
This August, the trade war to end tariffs looms, and the world seems to be stumbling towards an economic calamity that nobody wants, propelled by similar entanglements. …
Many free marketers hope that the president wants a world with no tariffs or trade barriers. To give him his due, our president is unpredictable and has achieved some remarkable negotiating successes by appearing to be crazy. A world of no tariffs would be lovely. But I’m dubious ….
[T]ariffs, once imposed, are devilishly hard to escape. Once our steel and aluminum industries and their workers get used to tariff protections, what president can take them away?
Once the Chinese have retaliated with their tariffs and their industries have grown used to protection, how can they take them away?
The whole post-WWII order was built around this difficulty — by creating multinational institutions, we slowly help countries to say to their protected industries, “Look, it’s going to be hard, but we can’t be part of the world and protect you anymore.”
The result was the greatest increase in trade and prosperity the world has known. If Trump’s bluff fails — or if it was not a bluff to begin with — that accomplishment is lost.
Politics gets used to tariffs as well. Tariffs, and tariff waivers and subsidies to counteract tariffs are handed out pretty much at the whim of the administration. It won’t take long for politicians to figure out this is a great way to reward friends and to punish enemies. Once in place, that is another reason why ending the tariff war will be so much more difficult.
Wars go on without end when they sink into a cycle of revenge and retaliation. Trade wars too. China and Europe’s tariffs retaliate against ours. We retaliate against those. As in the great war, it gets much much worse before exhausted antagonists give in.
