Trump’s trade war is here. Maybe.

Is this the beginning of a new trade war? Maybe.

Trump is a bully and this is his way of negotiating, from the old book: set a super high target, and from there you negotiate down.

Western countries trade with China is unfair, which causes a lot of unbalances. Blocked markets to help local titans, mandatory tech transfer to enter the Chinese market, different rule of law for outside companies, IP cybertheft, dumping… the list is long.

What will happen now? I think he will use the steel and aluminum tariffs as a bargaining chip. If I was him I would begin with mandatory technology transfers, which I think is the issue that most hurts western interests. You want to sell in China, you are forced to manufacture in China. You want to manufacture in China, you need to handle your IP to them. But Chinese companies can sell in western countries with no restrictions.

I don’t like Trump but I think it’s a good strategy, and a necessary one if you want to start tacking all these issues. The problem is that, when you begin slapping tariffs, you don’t know how the situation will unwind. For instance, if tariffs were really applied (which I doubt), they would hit Europe hard. Europe would have too much steel, so they would slap tariffs on countries that import steel into Europe, in order to avoid overcapacity. And so on…..

China is not a baby that need to be taken care of anymore, it’s one of the world superpowers. The US and Europe have been trying to balance the situation with them for a few years (as we explained on this article about steel), and Chinese have been all deaf ears. Now they finally got their attention and the negotiations will begin. Harsh, but effective.