Why, then, has Trump allowed his most Sinophobic advisers – US Trade Representative Robert Lighthizer, White House National Trade Council Director Peter Navarro, and Secretary of State Mike Pompeo – to start a game of chicken against China, which the US is bound to lose? Perhaps it is because Trump knows how to appear triumphant in retreat. By escalating confrontation to a level just short of real economic damage, and then offering peace terms that he knows China will accept, Trump can return to the pre-trade war status quo but emerge looking like a political winner.
Trump surely understands that applying 25% tariffs to Chinese-made consumer goods would be wildly unpopular with US voters. But he also knows that merely threatening tariffs can give the impression of “being tough on China” and of fighting for American jobs. Once he has reaped sufficient political benefit from this aggressive messaging, he can “force” China back to the negotiating table by quietly suggesting a diplomatic US retreat from its unrealistic demands.
Such U-turns, far from hurting Trump politically, have been a consistent feature of his rise to power. Throughout his career, Trump has understood that appearances matter more than reality – and nowhere more so than in modern US politics. Policy zig-zags allow Trump to win support by making unrealistic promises and then to win again by “pragmatically” recognizing reality.
In the US-China conflict, Trump has appealed to nationalist extremists with wildly belligerent rhetoric. Assuming that he remains true to form, once he has maximized the benefits of jingoism, he will then appeal to moderates by backing down and averting the damage that his reckless threats could cause.
If Trump eventually retreats in his confrontation with China, few voters will know or care that he failed to achieve his supposed economic objectives. Instead, Trump will win praise for “forcing” China into a negotiation that it never resisted and averting the risk of a trade war that he himself created. This is how Trump’s Art of the Deal works: declare war, restore peace, and then claim credit for both.
Anatole Kaletsky is chief economist and co-chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of "Capitalism 4.0, The Birth of a New Economy," which anticipated many of the post-crisis transformations of the global economy.