Nobody Wins a Trade War
Nobody wins in a trade war.
For the last few years, I’ve been keeping my eye on the trade situation, looking for signs of how it might affect the economy. While the US has a strong and resilient economy, there could be bumps in the road ahead, and I don’t take anything for granted.
Whether it’s rivals in China or allies in Europe, plenty of other countries have enjoyed the benefits of America’s commitment to free trade and open markets without fully matching our openness. Now that so much of the world is competing with America’s top industries, it makes sense that the US would try to level the playing field.
Unfortunately, tariffs might not be the right tool for the job. My grandfather once told me that when you’re carrying a hammer, everything starts to look like a nail. Tariffs are simple, direct, and easy to implement. It’s clear who they’re targeted at, so they’re convenient for sending a message.
The problem with hammering trading partners with a blunt instrument like tariffs is that they come with significant side effects. First, prices are rising on all kinds of goods. Today’s global supply chains mean businesses rely on a lot of imported materials to do their own work. As a business owner, I have no doubt that uncertainty in supply chains is going to be a drag on growth and investment.
The second problem with tariffs is that you have to expect retaliation. That’s why tariffs become a trade war. When I think about the tit-for-tat dynamic that characterizes trade wars, I’m reminded of some key lessons I’ve learned from my years in business.
It’s important to be a tough negotiator — nobody ever got rich by letting people walk all over them. And it’s also important to build relationships and trust. Over the long term, investing in being good to your partners tends to pay off.
If things go well, this trade war could open new markets to American businesses and it could erase unfair advantages that some foreign companies have, due to subsidies, protectionism, and other government intervention. But let’s remember the cost of winning these concessions. Building trust takes years, or even decades. Destroying it is all too easy.
I’m not predicting doom here — America’s economy is still strong, and we have so many advantages. But it looks pretty clear that uncertainty is going to reduce growth below what it could be.
