Trade Wars Are Easy to Lose
贸易战容易失败

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with,” U.S. President Donald Trump famously tweeted in 2018, “trade wars are good, and easy to win.” This week, when the Trump administration imposed tariffs of more than 100 percent on U.S. imports from China, setting off a new and even more dangerous trade war, U.S. Treasury Secretary Scott Bessent offered a similar justification: “I think it was a big mistake, this Chinese escalation, because they’re playing with a pair of twos. What do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us, so that is a losing hand for them.”
"当一个国家（美国）在与几乎每一个与之有业务往来的国家的贸易中都损失数十亿美元时，"美国总统唐纳德-特朗普在 2018 年发了一条著名的推文，"贸易战是好事，而且容易打赢。"本周，当特朗普政府对美国从中国进口的商品征收超过 100%的关税，掀起一场新的、更加危险的贸易战时，美国财政部长斯科特-贝森特提出了类似的理由："我认为中国的升级是个大错误，因为他们在玩一对二的游戏。中国对我们加征关税会给我们带来什么损失？我们对他们的出口占他们对我们出口的五分之一，所以这对他们来说是一手输牌。

In short, the Trump administration believes it has what game theorists call escalation dominance over China and any other economy with which it has a bilateral trade deficit. Escalation dominance, in the words of a report by the RAND Corporation, means that “a combatant has the ability to escalate a conflict in ways that will be disadvantageous or costly to the adversary while the adversary cannot do the same in return.” If the administration’s logic is correct, then China, Canada, and any other country that retaliates against U.S. tariffs is indeed playing a losing hand.
简而言之，特朗普政府认为自己拥有博弈论者所说的升级优势，即对中国和其他任何与之存在双边贸易逆差的经济体的优势。用兰德公司（RAND Corporation）一份报告的话来说，"升级优势 "指的是 "作战一方有能力以对对手不利或代价高昂的方式使冲突升级，而对手却无法以同样的方式作为回报"。如果美国政府的逻辑是正确的，那么中国、加拿大和其他任何对美国关税进行报复的国家确实是在玩一手输不起的牌。

But this logic is wrong: it is China that has escalation dominance in this trade war. The United States gets vital goods from China that cannot be replaced anytime soon or made at home at anything less than prohibitive cost. Reducing such dependence on China may be a reason for action, but fighting the current war before doing so is a recipe for almost certain defeat, at enormous cost. Or to put it in Bessent’s terms: Washington, not Beijing, is betting all in on a losing hand.
但这种逻辑是错误的：中国在这场贸易战中占据着升级的主导地位。美国从中国获得的重要商品无法在短期内被替代，也无法在国内以低廉的成本制造。减少对中国的这种依赖可能是采取行动的一个理由，但在此之前先打这场仗，则几乎必败无疑，而且要付出巨大代价。或者用贝森特的话来说：华盛顿，而不是北京，正在孤注一掷。

SHOW YOUR HAND  露一手

The administration’s claims are off base on two counts. For one thing, both sides get hurt in a trade war, because both lose access to things their economies want and need and that their people and companies are willing to pay for. Like launching an actual war, a trade war is an act of destruction that puts the attacker’s own forces and home front at risk as well: if the defending side did not believe it could retaliate in a way that would harm the attacker, it would surrender.
政府的说法有两点是不正确的。首先，在贸易战中，双方都会受到伤害，因为双方都会失去本国经济想要和需要的、本国人民和公司愿意支付的东西。与发动一场真正的战争一样，贸易战也是一种破坏行为，会使进攻方自身的部队和后方面临风险：如果防守方不相信它能以伤害进攻方的方式进行报复，它就会投降。

Bessent’s poker analogy is misleading because poker is a zero-sum game: I win only if you lose, you win only if I lose. Trade, by contrast, is positive-sum: in most situations, the better you do, the better I do, and vice versa. In poker, you get nothing back for what you put in the pot unless you win; in trade, you get it back immediately, in the form of the goods and services you buy.
贝森特的扑克类比具有误导性，因为扑克是一种零和游戏：你输我才能赢，我输你才能赢。相比之下，贸易是正和游戏：在大多数情况下，你做得越好，我就做得越好，反之亦然。在扑克牌游戏中，除非你赢了，否则你在赌注里投入的钱不会有任何回报；而在贸易中，你会以购买商品和服务的形式立即得到回报。

The Trump administration believes that the more you import, the less you have at stake—that because the United States has a trade deficit with China, importing more Chinese goods and services than China does U.S. goods and services, it is less vulnerable. This is factually wrong, not a matter of opinion. Blocking trade reduces a nation’s real income and purchasing power; countries export in order to earn the money to buy things they do not have or are too expensive to make at home.

What’s more, even if you focus solely on the bilateral trade balance, as the Trump administration does, it bodes poorly for the United States in a trade war with China. In 2024, U.S. exports of goods and services to China were $199.2 billion, and imports from China were $462.5 billion, resulting in a trade deficit of $263.3 billion. To the degree that the bilateral trade balance predicts which side will “win” in a trade war, the advantage lies with the surplus economy, not the deficit one. China, the surplus country, is giving up sales, which is solely money; the United States, the deficit country, is giving up goods and services it does not produce competitively or at all at home. Money is fungible: if you lose income, you can cut back spending, find sales elsewhere, spread the burden across the country, or draw down savings (say, by doing fiscal stimulus). China, like most countries with overall trade surpluses, saves more than it invests—meaning that it, in a sense, has too much savings. The adjustment would be relatively easy. There would be no critical shortages, and it could replace much of what it normally sold to the United States with sales domestically or to others.

Countries with overall trade deficits, like the United States, spend more than they save. In trade wars, they give up or reduce the supply of things they need (since the tariffs make them cost more), and these are not nearly as fungible or easily substituted for as money. Consequently, the impact is felt in specific industries, locations, or households that face shortages, sometimes of necessary items, some of which are irreplaceable in the short term. Deficit countries also import capital—which makes the United States more vulnerable to shifts in sentiment about the reliability of its government and about its attractiveness as a place to do business. When the Trump administration makes capricious decisions to impose an enormous tax increase and great uncertainty on manufacturers’ supply chains, the result will be reduced investment into the United States, raising interest rates on its debt.

OF DEFICITS AND DOMINANCE

In short, the U.S. economy will suffer enormously in a large-scale trade war with China, which the current levels of Trump-imposed tariffs, at more than 100 percent, surely constitute if left in place. In fact, the U.S. economy will suffer more than the Chinese economy will, and the suffering will only increase if the United States escalates. The Trump administration may think it’s acting tough, but it’s in fact putting the U.S. economy at the mercy of Chinese escalation.

The United States will face shortages of critical inputs ranging from basic ingredients of most pharmaceuticals to inexpensive semiconductors used in cars and home appliances to critical minerals for industrial processes including weapons production. The supply shock from drastically reducing or zeroing out imports from China, as Trump purports to want to achieve, would mean stagflation, the macroeconomic nightmare seen in the 1970s and during the COVID pandemic, when the economy shrank and inflation rose simultaneously. In such a situation, which may be closer at hand than many think, the Federal Reserve and fiscal policymakers are left with only terrible options and little chance of staving off unemployment except by further raising inflation.

When it comes to real war, if you have reason to be afraid of being invaded, it would be suicidal to provoke your adversary before you’ve armed yourself. That is essentially what Trump’s economic attack risks: given that the U.S. economy is entirely dependent on Chinese sources for vital goods (pharmaceutical stocks, cheap electronic chips, critical minerals), it is wildly reckless not to ensure alternate suppliers or adequate domestic production before cutting off trade. By doing it the other way around, the administration is inviting exactly the kind of damage it says it wants to prevent.

This could all be intended as just a negotiating tactic, Trump’s and Bessent’s repeated statements and actions notwithstanding. But even on those terms, the strategy will do more harm than good. As I warned in Foreign Affairs last October, the fundamental problem with Trump’s economic approach is that it would need to carry out enough self-harming threats to be credible, which means that markets and households would expect ongoing uncertainty. Americans and foreigners alike would invest less rather than more in the U.S. economy, and they would no longer trust the U.S. government to live up to any deal, making a negotiated settlement or agreement to deescalate difficult to achieve. As a result, U.S. productive capacity would decline rather than improve, which would only increase the leverage that China and others have over the United States.

The Trump administration is embarking on an economic equivalent of the Vietnam War—a war of choice that will soon result in a quagmire, undermining faith at home and abroad in both the trustworthiness and the competence of the United States—and we all know how that turned out.