Does Trump Know That A Trade War Caused World War I?

Yesterday President Trump announced sweeping tariffs on imports of foreign steel and aluminum, sending financial markets tumbling nearly 2%. Today he doubled down with a series of early-morning tweets, the most shocking of which was “Trade wars are good, and easy to win.”

Holy freaking Christ! I mean I understand that most Americans have little historical memory, and our educational system is in shambles, but you would think that the President of the United States would know that a trade war was one of the primary causes of World War I.

Yup, World War I. As in, the war that was fought between 1914 and 1918, with scores of countries and several continents involved. As in, the war that iconized the expression “trench warfare” and its accompanying images, with combatants lobbing artillery at each other in a grueling and vicious war of attrition. By the time an armistice was signed in November 1918, about ten million soldiers and five million civilians had died. The war was also infamous for introducing new forms of killing on a mass scale, such as the use of mustard and other chemical gases.

Let’s look at history for a moment. At the beginning of the 20th century, Britain was the industrial leader of the world, and it controlled roughly ¼ of the earth’s surface, as well as nearly all the seas, through its powerful royal navy. But Germany was a rising power, increasingly adept at steel production, and tank, plane and ship building. By 1914 Germany had surpassed Britain’s economic output and sought to challenge its overseas empire and colonies.

Britain responded by signing a series of military alliances with France in 1904, and with Russia in 1907.  Germany then countered by forming an alliance with Austria-Hungary.  Now I’m not saying that trade and industrial competition were the only factors that precipitated the war, but here’s a telling quote from Arthur Balfour, a former British Prime Minister, who told an American diplomat in 1907 the following:

“We are probably fools not to find a reason for declaring war on Germany before she builds too many ships and takes away our trade.”

Wow, is that eerie or what? Because just today we’re hearing rumblings from the affected exporting nations, such as Germany, Canada, and the head of the European Commission, that they may have no choice but to retaliate against America with trade tariffs of their own.

I mean Jesus, is this really happening? Are we really going back to 1914, with competing tariffs and trade wars leading to a world conflagration? The answer is probably not, but maybe. Because the world is so much more interconnected than it was in 1914, and it’s just hard to imagine Germany or Canada risking an all-out war with the much more powerful United States.

But that doesn’t mean it can’t get bad. Nationalism could ignite age-old animosities between nations. It’s already on the upswing in Europe, and now in parts of the US since Trump’s election. We’ve already seen some of this with European diplomats’ reaction to Trump’s declaration of an “American First” foreign policy.

Now a caveat is in order here. Because it’s true that American steel and aluminum workers have been suffering from foreign competition for years, as has the entire American manufacturing sector. But that’s the price of globalization. In exchange for no longer building our own ships, we get to create and build the most sophisticated and highest value-added products in the global supply chain, such as microchips, advanced auto tools, and the key knowledge economy products.

Well, mostly, I should say, because China builds a lot of these things too. But you get the point. It’s a grand bargain that most nations make as they move up the economic cycle and climb the ladders of comparative advantage.  You build more sophisticated things, and you generate more wealth, but the drawback is that you typically employ less people to do these things, and a lot of workers fall by the wayside.

But the answer is not to erect more barriers to trade and wall off the American economy, as Trump would have us do. And it’s probably not to go back to being a nation of shipbuilders either. It’s to retrain and support American workers so they can more fully participate in the best and most important parts of the knowledge economy, and thereby earn higher wages and a better standard of living.

We also have to guarantee a living wage, and lots of other things, because no matter how many workers we retrain and support, the service sector, such as Wal-Mart and McDonald’s, is and will remain a large part of the American economy, as it is for most advanced industrial economies.

So what’s the answer? Pay our service sector workers more! The nationwide movement for $15/hour is a good start, but we’ve got to go a lot farther if we want to guarantee a decent standard of living for all Americans.

So, after all this, where are we now? Where we are is on the verge of a very scary trade war, and it could be an inflection point that leads to new forms of virulent nationalism and xenophobia, deleterious competition among nations that benefits no one, and major new fault lines in the global economy.

All of which is bad enough.

Let’s just hope that we don’t get to the trench warfare and mustard gas phase, because I for one am not ready for that.

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