Over at the Peterson Institute, Chad Bown has predicted that trade fights will be more likely as Trump seeks reelection. As he noted, “as Trump believes, creating [trade] conflicts is good for me.” I have enormous respect for Chad Bown, who consistently puts out sensible commentary and analysis. But in this case, I think it is also just as likely that the president will tamp down actual conflicts between now and November. For both of us, given the mercurial, unstable nature of the president’s leadership, it is impossible to predict exactly.

But here are the reasons why things might not erupt. First, the president has already signaled that he will run on what he considers his excellent trade record over the first four years — particularly the US-Canada-Mexico Agreement, as well as agreements with Japan and Korea. Added to that, the administration will be trumpeting even more loudly the signing of the “Phase 1” agreement with China slated for January 15.

It is true that, as the Democrats will argue, in a real sense the “Phase 1” agreement is a cop-out. But politically the Trump administration will argue that, even with the lack of structural changes, China’s potentially importing an additional $100 billion in agricultural and manufacturing goods and services over the next two years is a significant victory. Phase 2 negotiations with China will go well beyond 2020. Additionally, in regards to Europe, the president seems to have put off indefinitely the tariffs on automobiles based on a bogus national security argument. It’s not likely that there will be a major agreement between the US and Europe over the next year. There could be some conflict over the move by the French and others to impose digital taxes.

Second, the president seems to have been convinced,
for the moment at any rate, that the key to winning the election will be to
continue a healthy and growing economy. His advisors would certainly argue that
he should do nothing to disrupt what seems at the moment to be the prospects
for a continued benign and supportive economy as he seeks reelection.

Of course, all of this could change in an instant, and
Chad Bown could be right. But at this point, it is equally possible that the
president will hold off any disruptive action even though he may increase his
anti-trade rhetoric — against the deficit with Germany or too many
Mercedes-Benz on the streets of New York as a part of his campaign. We will
see.

POSTSCRIPT: The crisis with Iran will only increase
the pressure on President Trump not to pick disruptive trade fights.

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