Wednesday, April 9, 2025

How this Trade War could lead to World War III

Today, China announced new 84% tariffs on American goods and other measures to retaliate against Donald Trumps' 104% tariff against China. The 104% came after China imposed new 34% tariffs on America which came after Donald Trump increased tariffs on China by 34%. 

 And so it goes. 

 What is lost on Trump zealots who want to see the U.S. flex its economic muscle against China and other nations is that their patriotism masks an appalling lack of knowledge concerning history, economics and human nature. 

 Specifically, in 1930 the Hoover Administration responded to the early stages of the Great Depression by passing the Smoot-Hawley Tariff Act. This Act drastically increased tariffs on virtually all U.S. trading partners despite letters from thousands of economists who begged President Hoover to not take this action. Not surprisingly, our trading partners retaliated and the global economy, already reeling from the vestiages of World War I, plunged deeper into what became a global depression.

 Most economists argue that the Smoot-Hawley Tariff Act ranks at or near the top of the list of causes of World War II. It is pretty simple. Historically when the flow of goods stops between nations, the flow of bullets and bombs begins. This is a fact that is lost on supporters of Donald Trump and his economically irrational and idiotic war against trade deficits we have with other nations. China has made it clear that it will "fight until the end" and is ready for a trade war or "any war".

 China has never been more prepared, militarily or economically, for a protracted war - of any kind - against the United States. Economic reasoning would suggest that China will not wage a military war against America. After all, we are China's biggest customer and we own them trillions of dollars. Why would China destroy the U.S. in a nuclear war when it would mean similar devasatation for them? It makes no economic sense to kill your biggest customer and lose out on all of the money that you are owed. 

 Yet, as economists have increasingly observed, sometimes human beings are capable of engaging in irrational behavior where we know the costs of some action will be greater than the benefits but do it anyway. Just how far will China allow itself to be bullied, harassed and threatened? How long will China be willing to endure the prideful and arrogant threats of an administration that is determined to end the era of globalization that has created enormous wealth for the United States and the world while preserving world peace for the past 80 years?

 As history has clearly taught us - at least those of us willing to be taught - sometimes the slightest miscommunications and human error can have fatal consequences. It is part of human nature to believe we can guide the future and know what our actions will create. This is pure folly and this type of hubris is what we are seeing now. 

 As Americans go about their normal routines today, it is very likely that few are even considering how perilously fragile our civilization is. This is not 1945 where the U.S. was, by far, the biggest military and economic power. In 2025 the planet is very small and the ramifications of human arrogance and error are greater than ever.

 My advice to those Trump supporters who are cheering him on would be to sit down tonight and watch the 1983 movie, "The Day After". This movie helped President Reagan (the last great Republican) become even more determined to work WITH the Soviet Union to avoid World War III. Now more than ever we need the same humilty, character and intelligence from the President of the United States - so that there will still be a United States.

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