A Trade Skirmish Is Underway. That Doesn’t Mean a Trade War Is Near.

The EU is not going to have it and indeed they maybe should start to look for some new allies and trading partners in the east.

WTO proceedings can last a very long time.

TESLA complaining China rigs its market with ownership rule requiring 50 / 50 joint-ventures with Chinese partner. Despite this Chinese rule TESLA negotiating with Shanghai government to open US manufacturing plant. Chinese auto market as the largest in the world. Ignoring China is not possible. For years TOYOTA refused to enter China but in the end agreed to a Chinese joint-venture. China operates a price or bar to foreign companies to manage their economy in an orderly way. If 25 foreign auto manufacturing companies operated in China with no Chinese partner there would be chaos. China is an limited open market but it has reasons to structure foreign ownership. Guess how many foreign auto manufacturing companies in JAPAN: NONE. Note: Ford has closed all operations in Japan. TESLA has a choice to join GM and Ford in China.

It would be better if we could address the fundamental inequities of international trade rather than the consequences. A discussion has to start somewhere.

Neil Irwin clams that "the Trump administration has mostly paired the president's bellicose language". But what it has not been able to do is pair the Trump administration of Donald Trump. Trump is a madman, and that means that he very likely will go ahead with these bizarre and illegal tariffs. And that will, most assuredly, start a disastrous trade war. Wishful thinking about Trump will always turn out to be a mistake.

One small voice of sanity.

Neil, your coverage of trade issues is usually spot on, but you're a little off this time. The Trump administration has not signaled that it will "act within the rules". The additional tariffs that the United States plans to impose are illegal under WTO rules. The administration has suggested that these tariffs are exempted under the WTO's "national security" exception, but everything that the administration has done and said so far demonstrates that these tariffs have nothing to do with that exception. Using illegal tariffs in an attempt to coerce trade concessions from your neighbors (for example) cannot be justified under the "national security" exception. The United States will soon rue the day that it decided to abuse the WTO's national security exception -- US agricultural exports are now in the crosshairs. We do, in fact, stand on the brink of a trade war.

I don't know what planet this is coming from. Trade constitutes more than the flow of goods and services and whatever tariff and other barriers shape it. This is particularly the case for US-Canada trade. Here, a host of historical economic, political and military agreements have laid down an overall playing field in which trade proceeds. The long term stability of these agreements and the attendant stability of the respective government on both sides of the border have led not only to an extraordinary volume of trade, but also into very tight integration: increasingly, things best made in one country ARE made there and shipped to the other party. Production of those things in the receiving country is correspondingly less. Thus huge amounts of hydro-produced electricity flows into the NE US from Quebec, removing the necessity for the latter to generate power from fossil fuels. US software giants in California find a ready market for mass market products in Canada, where software innovation is consequently restricted to newer, often smaller projects. Dropping a huge tariff on primary products that flow across the US-Canada border in such vast quantities as aluminum and steel is, in this light, not normal trade practice by any stretch of the imagination. Saying a few days later that, well, it might not happen at all or that it might not happen if Canada caves on its requirements for a renewed NAFTA isn't 'normal' either.

"the rebound in the financial markets in the last week suggests that the chances of a complete breakdown in the global trade system remain remote" Faith in the market is a religion. The notion that a trade war only has losers is one article of that faith. In fact, it there will be winners and losers. It may well be that large companies with stock traded in the markets are likely to be among the winners. Another article of faith, contradicted over and over again by experience, is that the market has a window into the future. But even if you still have faith in the market's ability to predict the future, it may be predicting a trade war if that will benefit the companies whose stock is being traded. The third article of faith is that there are "rules" for the market other than self-interest. But in fact, the "rules" of the market are designed by and for the wealthy and powerful. As a result, the United States has been in a position to dictate a lot of those rules and they have been dictated to benefit the wealthy and powerful American ruling elite. What we are likely seeing in the market is the faith of investors that the balance of power has not shifted so dramatically as to change that.

You don't have to like Trump to recognize that countries that run a trade surplus vis-a-vis the US stand to lose more in a trade war than the US does. And let's not forget that virtually no credible economist today believes that the Smoot-Hawley tariffs were a significant factor causing the Great Depression. That's something out of 1970s and 1980s high school social studies textbooks.