HOW WILL THE TRADE WAR END?

Predicting the Post-Trump Future

Gazing Into a Crystal Earth Ball

Summary

After reviewing the tragic comedy of Trump's trade war on the world so far, the author goes out on a limb to try and predict the outcome of this rampage, and its ultimate, possibly positive global consequences.

What really happened in the trade war so far?

Here's my take on the US trade war on the world so far, followed by my prediction: Firstly, President Trump badly overestimated US relative economic strength, and thus his bargaining position. He thought he could take on the whole world and win, but the US economy is not strong enough.

Total trade worldwide in 2024 was US$ 33trn, driven by services and developing countries or 30% of total global GDP. The US imported $3.3trn in 2024 in goods compared to exports of $2.1trn. That $3.3trn in imports was 10% of world trade in 2024, and just 3% of global GDP of $110trn.

Trump's second miscalculation was to think tariffs would not cause great self harm to the US economy. The IMF has now predicted that Trump's tariffs, as they presently stand, will cause a 0.9% reduction in US GDP in 2025, compared to 0.6% in Canada and 0.5% in China. The biggest loser from the USA's new tariffs is clearly going to be ... the USA.

The height of absurdity was 'Liberation Day'. After a long buildup and great fanfare, Trump announced huge tariffs on the whole world, and then immediately choked on them as markets fell. Just as with Mexico and Canada weeks earlier, he quickly 'suspended' his gigantic new tariffs and turned on China, the county he knew US citizens love to hate.

Then he made his third, and worst, mistake: He assumed that China would cave in. Yet, any amateur student of China knows how a Western power once again bullying China would go over in Beijing. China jacked up their own tariffs against the US and dug in for a fight. This time, Trump's morning-after hangover was even worse, as the gravity of his latest binge sank in: He had imposed tariffs of 145-245% on imports of many of the USA's own products, including their beloved iPhones. Oops.

Trump promptly lifted the tariffs on such American electronics, leaving his spokespeople stumbling to explain this latest reversal: 'We will, uh, be imposing other tariffs on such items, uh, later.' Now, they're left tripping over themselves again as Trump has fathomed that tariffs on steel and parts will strangle the US auto industry, not revive it.

One of Trump's great strengths is his awesome ability to lie. U.S. prices, he tells us, are falling (they are rising, due to his tariffs). He has done 200 trade deals since he threw down the gauntlet. Uh huh. And do we have any specifics about just one of these "200 deals?" Nope. Tariff revenue is already $2bn per day, he lies. In truth it may have reached $500m.

In this tragic comedy, Trump insists that scores of countries are 'kissing his ass', and that 'China wants to make a deal'. 'They [China] are talking to us', he insists. 'No we aren't', replies Beijing, repeatedly and emphatically, canceling orders for up to 50 new Boeings. Beijing's position is that the US must drop all new tariffs before talks can even begin.

How will it end?

Now I will go out on a limb and try to predict the future, especially shaky with a character like Trump: Firstly, China will of course aim to have Trump come out looking even sillier than before, and will not agree to anything early. Beijing will instead observe how talks go with other countries, while itself pursuing freer trade with many countries.

By 8 July, after Trump's 90-day pause, Trump will repeat his first mistake and attempt to simultaneously arm wrestle with the entire world again. He will announce a few 'deals', perhaps with South Korea, or even Japan, but the USA's largest trade partners, Canada, Mexico and the EU, will not be rushed. Market turmoil will thus be worse than in early April. Trump, having also repeated his second mistake—underestimating US vulnerability — will balk again, twisting and turning like a white water kayaker who has lost control in the rocks. Angrily (as always), he will up the ante further, most likely widening the war into the financial sector in an even more desperate gamble to come out 'on top'.

Trump will no doubt be keen to repeat his third mistake as well, and try once more to strong arm Beijing. There are many ways for the USA and China to senselessly harm each other's economy and security. China has made provision in the Hong Kong stock market in case Washington tries to de-list Chinese companies from US exchanges. Some fear Beijing might dump its US Treasury bonds, but I predict a more gradual sell-off. Beijing will also refuse to authorize sale of US Tik Tok, forcing Trump to grant it another extension or face millions of disappointed youths. More variants will be tried of the idiotic game of 'sure, I lose, but I bet you will lose even more' .

By the end of this year the US will at the very least have a decline in GDP for a quarter, possibly a recession, and world GDP will be seriously dented. Despite snow storms of Trump's lies, it will become apparent that his tariffs were a gargantuan failure, that the US trade deficit hardly declined, and that the federal budget deficit has increased after tax cuts. The circus act that made cutting off whole limbs of the US civil service into a macabre performance art form will yield limited savings. Musk, having chainsawed off several of his own fingers in the process, is quietly leaving the ring.

US unemployment figures will rise, despite the Secretary of Labor's moving the data to a new website and adding a dubious, 'seventh definition' of it. In truth, Trump's shenanigans will have deadened the business climate. Many businesses and farms, suffering reduced exports, will have lain off workers. Yes, a few business leaders have helped Trump feed his narrative with grand investment announcements and they will proceed, slowly. Some small firms, too, are hastily setting up simple final assembly in the USA. However, overall investment will slump; consider that by the time a large new US plant built from scratch reaches full production, Trump will be almost gone....

China's economy will suffer, and there are already signs. Companies whose buyers are mostly in the USA have already begun layoffs or reduced shifts. World-class DJI drones just won't sell as well in the USA at twice the price, nor will those old inflatable Santas. But China's trade with other countries, especially the growing Global South, will continue to increase by about 5% a year, enough or almost enough to compensate for reduced trade with the USA.

By 2027, the world will have entered an exceedingly dangerous period, with the biggest global arms race in history in full swing and China and the USA continuing to back away from economic ties. Legal and congressional curtailment of Presidential over-reach will have brought Trump's executive ordering to a near standstill, his popularity continuing to sink along with his dream of an unconstitutional third term.

Trump will then want to do what lame duck Presidents do, and turn his attention wholly to foreign affairs. However, his tariff wars will have left him with no real supporters internationally, only a ghostly assembly of plastic smiles and sarcastic grins, all wishing him ill.

How does a world class narcissistic egomaniac react in such a humiliating situation? Will he just retreat into an ever-more self-delusional state as his term wears on and on? While Trump, to his credit, maintains that he dislikes war, he has threatened to attack Greenland, Panama and Iran in just his first few weeks back in the White House. If he's choosing between being a 'loser' and starting a war, I would place my wager on the latter.

China, though, is too close to his own size and too plucky to dare pick on. Nor will bombing of Iran suffice as that is Israel's idea. No, it will be time for something nice and safe, but original — something meant to dazzle us with his audacity — perhaps reminiscent of the pathetic US invasion of Grenada in 1983. Annexing territory makes for a solid legacy, but his confidants will have talked him out of taking Greenland. So he will improvise, targeting some small country with lies and then meanly invading it, claiming it is a 'threat to national security'.

The Post-Hegemonic World Order Takes Shape

Soon after such a final catastrophe, Trump will be gone, back to his regular life of golf, tweeting and court appearances. His party, disorganized, will lose an election that will nearly become a civil war. Eight years of haphazard US Democratic Party rule will follow, but of less consequence to the world as the USA remains in pitched battle with itself.

The world, however, will never go back to anything like the state it was in. The turmoil Trump is causing will indeed change it, by giving an enormous push to a pendulum swinging between global anarchy and renewed internationalism.

Imagine a crowded room immediately after a loud and dangerous bully finally leaves. The atmosphere abruptly relaxes, in an instant becoming more convivial. Unburdened of flailing US 'leadership', many will gravitate together. It will be far from ideal, with many leaders loathe to admit it, but after Trump goes, cooperation between countries will be smoother than before. In his wake, those huge waves he caused will have left countries more inclined to strengthen international cooperation, in order to prevent the kind of turbulence they just experienced.

The West will be diluted while BRICS will grow stronger, adding more members and becoming the leading proponent of multilateralism and peace. Mediation in wars by non-Western countries such as Brazil or Turkey will become the new norm, and with greater success than their predecessor. New free trade agreements will be signed, pushed by developing countries hungry for growth. A slightly less dim awareness will even dawn of the frightening risk of apocalypse, with new efforts at trilateral nuclear arms control. A few years later, an expanded UN Security Council will finally be agreed to (after nearly 40 years of talks), a landmark achievement despite the veto remaining. The Paris Agreement, led by a determined China on track for zero carbon 2060, will breathe new life. Average temperatures, though, will go on ominously rising.

In short, a new world order based on greater multilateralism and greater global openness and interdependence will begin to take shape, ever-flawed, but somewhat better than before, and sooner than would have otherwise occurred. Trump, by providing such a terrifying example of our dark alternative path — of humanity's lurking collective psychopathy — will have inadvertently changed the world for the better. Imagine that.

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