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“Our pricing strategy will be to shoot first and ask questions later.” This is what one of Donald Trump’s main economic decision -makers told me at the end of last year.
This kind of fanfaron macho is currently fashionable in Washington. But the US president’s shooting tactics are deeply dangerous – for America itself, as well as the countries it has targeted with prices.
The potential economic risks for the United States – higher inflation and industrial disturbances – are well known.
The strategic consequences for America are less immediately obvious – but could be just as serious and even more durable. Trump’s prices threaten to destroy the unity of the Western alliance. It dries the seeds of an alternative group formed by the many countries that feel newly threatened by America. Cooperation will be informal at the start, but the pricing wars will continue to continue.
The collapse of Western unity would be a dream come true for Russia and China. Trump himself may not care about it; He has often expressed his admiration for Vladimir Putin and Xi Jinping. But Marco Rubio and Mike Waltz – The men whom Trump appointed Secretary of State and National Security Advisor – both claim to believe that the content of Chinese power is the central strategic challenge in the United States.
If this is the case, it is deeply stupid for Trump to impose prices on China, Mexico and Canada. In doing so, he creates a convergence of interest between these three countries – as well as the EU, which was informed that it was the next online for tariff treatment.
When the Biden administration took office in 2021, the EU was ready to conclude a new investment agreement with China. But it was abandoned after pressure from Washington and Blunders by Beijing. At the end of period Biden, the United States and the European Commission worked closely on efforts aimed at “desired” trade with China and to restrict exports of key technologies.
The administration of the Biden administration was that, if the United States is engaged in a global competition with China, it is much more likely to prevail if he can persuade other advanced democracies to work alongside. Trump, on the other hand, decided to continue the American allies much more vigorously than his opponents. The probable consequence is that it will bring these allies back to China.
European decision -makers already know that the ambitious objectives they have set for the green transition will be impossible without Chinese electric vehicles, batteries and solar panels. The threat of losing American markets will make the Chinese market even more necessary. When I suggested to a first European decision-maker last week that the EU could now consider heating up again in China, she replied: “Believe me, this conversation is already taking place.”
Some influential Europeans are asking even if the United States or China is now the most direct threat. It would have been an absurd question just two months ago. But it is Trump – not XI – who talks about putting an end to the independence of Canada, a member state of NATO. And it is the Trump and Elon Musk administration – not the Chinese government – promoting the far right in Europe.
Chinese mercantilism and Beijing’s support for the Russian War against Ukraine remain major of stirring to any rapprochement between China and Brussels. But if the Trump administration abandons Ukraine – and Beijing takes a more difficult line with Russia – the path would be open to European inclination to China.
China will also feel new opportunities in Latin America while the continent bristles American threats to Panama and Mexico. The action of the aggressive United States against these countries – including military force – is clearly possible, given Trump’s determination to regain control of the Panama Canal and to face the Mexican drug cartels.
But Trump’s attack on Mexico is likely to be counterproductive. If the prices push Mexico in a deep recession, the flow of desperate people heading to the United States only increased – just like the power of drug cartels, whose exports are not subject to prices.
Canada and Mexico are painfully aware that the chances are against them in a trade war with the United States. But they are forced to retaliate. No national leader can afford to seem weak in the face of American intimidation. And Riping against Trump is probably the right strategic decision. As a European Minister of Foreign Affairs said it recently: “If Trump strikes you in the face and you don’t hit, he will hit you again.”
Countries like Great Britain and Japan that have not yet been distinguished for prices could push a sigh of relief. But they joke if they think that keeping a low profile will buy them immunity. If Trump decides that his first pricing war has worked, he will certainly seek new targets.
US companies must also wake up and stop the sycophetic session on the return of “animal spirits” to the American economy. What Trump essentially offers America is an economic Autarky and the destruction of the Western alliance. It would be an economic and strategic disaster for American affairs – and for the United States as a whole.
gideon.rachman@ft.com