Opinion | Trade wars cause world wars, history shows. Will this time be different?

Cary Huang says the risk of armed conflict has to be acknowledged, with the trade war now affecting a swathe of US allies, and with the two main actors in the dispute – China and the US – showing every intention of a fight to the end in a tit-for-tat tussle

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Doves are released during a memorial ceremony at the Nanjing Massacre Memorial Hall on December 13 last year, to commemorate the 80th anniversary of the massacre in Nanjing during the second world war. Trade wars stoke nationalism and hatred among people and finally trigger wars, as evidenced by the breakout of the second world war. Photo: AFP

Published: 1:00pm, 17 Jul 2018Updated: 7:28pm, 17 Jul 2018

US President Donald Trump’s conviction that “trade wars are good, and easy to win” certainly runs against well-established economic doctrine and history, both of which suggest no one can win and all will lose in such a mutually destructive war.

Worse can happen than just material loss to the countries directly involved. While a country may try to destroy another by targeting its economy rather than its military, history suggests that a full-blown trade war inevitably leads to a shoot-out between nations.

The first shots of the current war have been fired, with the United States and China each imposing punitive tariffs of 25 per cent on US$34 billion worth of the other’s imports. Neither Washington nor Beijing has shown any intention of backing down; both appear prepared for a tit-for-tat fight.

US tariffs are expected on a further US$200 billion worth of goods, though Trump has threatened to target US$500 billion worth of Chinese imports, approximately the value of China’s exports to the US last year. Meanwhile, Beijing has pledged retaliatory measures of “the same scale and intensity”.

Trump has also fired a salvo of shots on all of America’s main trade partners, including its allies in the post-war Atlantic trading alliance, from Canada, Mexico and South Korea, to Japan and Germany.

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