Q: You said the president has a plan. Even in broad strokes, what is that plan?
A: That’s in the president’s mind and in his negotiating strategy. He is a different type of negotiator. I don’t think any foreign country has ever gone up against a president like President Trump before. That’s his style. Frankly, it’s been pretty effective so far in other areas. I think he and President Xi (Jinping) in China have a great relationship. I think it will be dealt with on a personal basis. The goal is, obviously, to get China to change its ways so we can resume trade between our countries. The president, however, does not intend to tolerate a $350 billion to $400 billion trade deficit going forward.
[1] http://www.chicagotribune.com/business/ct-biz-sonny-perdue-q...
The reasons why are what I think you've pointed out— there really isn't much of a plan on their part. It's just reactionary and rabble-rousing (with a hefty price tag for those who get hit by the outcomes).
China has noticed: they've ordered Xinhua to entirely stop talking about 2025 [1]. After 140 mentions of 2025 in the first five months of the year, there have been zero since June 5th. Having violated Deng's hide your strength (and bide your time) premise, they're clearly looking to be more clever about their plans again.
Trump's trade war with China would work extraordinarily well, if he'd just coordinate properly with allies on it. As you say, he's pursuing a broad brush trade conflict with numerous fronts simultaneously, difficult to manage to say the least.
The overall positive of what's going on, is China's scheme is over. There's no going back to the free ride approach that has allowed China to play by entirely different rules than every other major economy.
[1] https://ca.reuters.com/article/businessNews/idCAKBN1JL12U-OC...
But I'm honestly not sure why his administration seems to also be targeting allies such as the EU, Canada, and Mexico. I'm sure there are "quibbles" with trade on trade with these countries, but my impression was there were no major problems there.
The other problem with Trump's tariffs IMHO is what you point out: there is a lack of coordination with allies, and a general chaotic nature.
Overall, uncertainty on this front probably isn't the best for business planning, given that the tariffs have more of a whiff of generic isolationism than punishing any misdeed.
Seems like this should be more fair all the way around. What we have with this isn't free trade.
I just wasn't aware of any major outstanding issue that required a "trade war" type scenario with these countries (EU/Canada/Mexico) now.
The issue with trade wars is that the tariffs that result can end up lasting far longer than one might expect, and from what I see most economists consider the overall impact negative. The 25 percent tariff on light trucks in the US for instance comes as a direct result of a minor "trade war" between West Germany and France on chickens from approx. 1961-1964. (https://en.wikipedia.org/wiki/Chicken_tax)
Generally speaking, if a tariff another nation imposes is bothersome, removing tariffs in a negotiated deal is what has tended to work over the last several decades. That 10 percent auto tariff was recently negotiated away in Japan, for instance, with Japan likewise removing some tariffs they applied on EU products. (http://europe.autonews.com/article/20171208/ANE/171209797/eu...)
In the case of China, where they are more prone to violating WTO rules, that approach might not work, and a more aggressive stance might be justified. But the EU, Mexico, and Canada? Not so sure there.
US imposes a 2.5 percent tariff on European autos. The EU imposes a 10 percent tariff on US autos. How is that fair? Why should the US not impose tariffs and just accept that?
It's very easy to cherry-pick particular tariffs, but the truth of the matter is that maximum tariffs are generally constrained by international agreements that have lots and lots of horse-trading over what is accepted. When you look at all products, the US doesn't look particularly generous compared to the EU. Source: https://www.economist.com/finance-and-economics/2018/06/14/h...
It should also be pointed out that the EU has sugar tariffs which is why beet sugar is big in Europe.
My guess is that Canada's action here, along with the EU, will be pretty influential, as China won't just be able to dump all their US-bound steel on those markets.
I don't necessarily disagree with the Trump administration's moves against Chinese economic behaviour here, but I do think that exemptions should have been made for Mexico, Canada and the EU at a minimum.
If this had been about getting China to play fair, and co-ordinated well with other major economies, I think this could have worked out pretty well. But it seems Trump's main goal here is domestic protectionism at any cost.