Note: The following is an edited translation of a commentary on the
U.S.-initiated trade dispute from the Chinese-language "Commentaries on
International Affairs (国际锐评)"
Donald Trump turned a blind eye to repeated warnings from China,
Canada, and the European Union that a trade war has no winners. Now he
has to face the bitter reality that, instead of standing with him, the
American manufacturers he has been vowing to protect are turning away
American motorcycle manufacturer Harley-Davidson announced that it is
moving more of its production overseas. The company said this was
because of cost increases resulting from the European Union's
retaliatory tariffs against the Trump administration's tariffs on
European steel and aluminum.
world witnessed President Trump's anger following Harley's announcement.
On Twitter, he described the move as a surrender, threatening that
Harley will be "taxed like never before" if it goes ahead with the plan.
Trump's eyes, the manufacturing industry in the United States was likely
a vital contributor to his election victory in 2016. His tax reform
bill and his tariffs against America's trading partners, after all, are
aimed primarily at benefiting domestic manufacturers and fulfilling his
campaign promise of "bringing manufacturing jobs back to America".
President Trump would seem to believe that his trade war tactics would
win him support from signature manufacturers like Harley.
Trump appears to have forgotten the basic rule that businesses are
pragmatic. Harley-Davidson, one of the main targets of the European
Union's retaliatory tariffs, has seen its import duties to that trading
bloc surge from 6 percent to 31 percent. This leads to a price hike of
2,200 U.S. dollars for each motorcycle it sells to its customers in the
European Union. This is hurting the company's sales in that market,
which accounts for 17 percent of its global sales. Harley's declining
sales in the United States make it almost impossible for the home market
to compensate for its potential losses in Europe. Therefore, it is
inevitable that part of its production would be moved overseas to avoid
surrender of Harley will not be an isolated case. As retaliatory tariffs
on American goods are imposed by the European Union, China, India,
Turkey and Mexico, more and more of the country's manufacturers are
likely to follow suit and move overseas. Of course, President Trump
could tax companies that choose to do so "like never before", but he
would only end up destroying business and investment confidence in his
And the Trump
administration is apparently casting shadows on investment, employment,
consumption, and capital market sentiment around the world. Ports and
airports are seeing a slowdown in the shipment of goods. The United
States is experiencing price hikes for raw materials like steel and
aluminum. American agricultural products are losing their overseas
markets. In Germany, factory orders are weakening. The U.S. Federal
Reserve chief Jerome Powell has said some companies in the United States
are telling the central bank that they are holding off on investing and
hiring because of the Trump administration's trade policies. And a new
report from the Bank of International Settlements is warning that the
economic gains of last year could be undone by rising protectionism.
It is unlikely
that President Trump is not aware that his trade policy could have
negative consequences. But the consequences are being realized much
faster than he expected. Rarely beaten in business negotiations as a
real estate mogul, President Trump obviously believes that he could use
his negotiation tactics of the past in trade talks with other countries.
However, trade among sovereign states is fundamentally different from
real estate business deals. President Trump has no experience in dealing
with trade frictions, not to mention trade wars. In a globalized era
when all the major economies are profoundly intertwined, unilateral acts
of threats, coercion, and bullying can hardly shake a multilateral
trade system from which most economies have benefited over the years.
The head of
the International Monetary Fund, Christine Lagarde, recently warned
again that there is no winner in a trade war. The same warning has been
issued by Christian Ewert, the director general of the Brussels-based
Foreign Trade Association, and Mukhisa Kituyi, the secretary-general of
the United Nations Conference on Trade and Development. Faced with so
much opposition and criticism both at home and abroad, President Trump
will continue to see his trade policy backfiring.