Trump focuses his economic war on China. Will weary U.S. allies follow?
Other countries aren't fully spared — and ripple effects could be massive for global markets
An economic war of global titans has erupted, with the U.S. versus China in multitrillion-dollar volleys of tit-for-tat tariffs.
And in this epic geopolitical standoff, the U.S. is counting on having friends by its side. Unfortunately for those allies, the U.S. hasn't finished spraying them all with friendly fire.
President Donald Trump sent stock markets soaring on Wednesday by softening some of his market-crushing tariffs — though many remain in place.
Trump admitted to having seen the wild reaction in bond markets that had some experts expressing fear not just of a stock crash, but a full-blown financial crisis.
So the U.S. president switched to Plan B: "You have to be flexible," Trump said Wednesday.
What does it mean? It means different things, for different countries — for China, for North America and for the rest of Planet Earth.
China will now get a 125 per cent tariff, potentially shutting down large swaths of the U.S. market.
The ripple effects could be massive, from unsold Chinese goods swamping world markets, to the more frightening spiralling of tensions.
"From the Chinese perspective, I do think this is far more than just a trade war — and [more than] economic. That makes it hard to be optimistic," said U.S.-based China analyst Bill Bishop on his podcast.
"We're starting on a very precipitous decline in the China-U.S. relationship."
Other nations aren't being hit so hard, but they're not being spared, either.
Most of the world now gets a 10 per cent tariff — which was the minimum tariff announced last week — plus larger tariffs on steel, aluminum, autos and likely lumber and pharmaceuticals.
What about Canada?
Well, if you're a tad confused, don't feel bad. So is the White House. In the span of an hour Wednesday, the Trump administration performed two U-turns on its North America policy.
It was initially adamant that Canada and Mexico would get the new 10 per cent tariff; then it went silent for a while when asked for specifics. By late afternoon, it backtracked. Its end position was the status quo.
The bottom line is: Nothing changes for Canada this week. The countries will negotiate an update to their trade and security arrangement after the federal election.
In the meantime, Canadians still get a Swiss cheese of duties: 25 per cent on steel and aluminum like everyone else, and on some auto parts, and on some goods traded outside the rules of the Canada-U.S.-Mexico pact.
All this made for some strange scenes on Capitol Hill.
By sheer coincidence, as all this news broke, the president's trade representative happened to be testifying in a previously scheduled, routine hearing.
Jamieson Greer had been speaking for hours, defending Trump's trade policy, when people in the room learned suddenly of the tariff climbdown.
"Did you know this was happening?" Rep. Steven Horsford asked Greer.
Greer was vague on what he discussed with Trump.
"WTF. Who's in charge?" the Nevada Democrat said. "This is amateur hour — and it needs to stop."
"It looks like your boss just pulled the rug out from under you.… There's no strategy. You just found out. Three seconds ago. Sitting here."
Greer appeared to indicate that he, in fact, knew the tariff announcement was a possibility but did not explicitly claim to be aware it was coming, saying: "We have been discussing all kinds of options."
At that very moment, the stock market was experiencing one of its most vertiginous surges in history, with the S&P 500 soaring almost 10 per cent, though it's still down on the year.
But that festive investor reaction belied the more sobering reality that global trade will continue to be in a murky place for months.
The U.S. retains its highest tariffs in generations. It's embroiled in an economic war with one of the most populous nations on Earth. And its allies are confused.
Several Democrats have been warning Trump's trade representative in hearings this week that the U.S. is burning valuable relationships.
"[Tariffs on] China, I completely understand," Rep. Brendan Boyle of Pennsylvania said Wednesday. "But why go after Canada? Why go after our closest allies in Europe? This does not make any sense. [You're] uniting the whole world right now: not against China, but against the United States."
Some Democrats questioned why any country will want to sign a deal with the U.S. now, when Trump just ignores deals.
The administration insists they have good reason.
First of all, Greer said, CUSMA is still in effect, providing protection from tariffs for many — though not all — goods. He said the U.S. remains the world's biggest market, and countries will want in.
Treasury Secretary Scott Bessent ridiculed the idea, raised by one European politician, of countries turning from Washington to Beijing.
"That is a losing proposition," he told Fox Business. "Basically, China's surrounded."
The decline in access to the U.S. customers will, he predicted, force China to dump products onto global markets at rock-bottom prices.
He urged other countries to prepare to protect their own industries from this incoming avalanche of cheap goods. "Guess where they are going to land: on the European shore."
A better approach, he said, would be to work with the U.S. to force China to buy more from the rest of the world, and rebalancing its economy away from a reliance on cheap exports.
What does the U.S. want, specifically?
As Greer mentioned a couple of times, the U.S. publishes an annual list of complaints about other countries' trade practices.
This year's edition has six pages on Canada, featuring well-known gripes about dairy, digital taxes and, most recently, Quebec's new language law.
The China section is 48 pages long; the document mentions China 867 times.
And everything that happened this week — the stock-market crash; the surprise bond-market surge; warnings of a financial crash; the retaliation; the shifting White House policy; the contradictions involving Canada; Trump himself conceding he needed to be flexible — it was all planned, his aides insist.
Trump's "master strategy, bold statesmanship and brilliant tactical planning has done more to reform broken international trade in days than anyone has achieved in decades while economically and politically isolating the global architect of economic aggression: China," aide Stephen Miller tweeted.
That's the official line, at least.
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