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Your guide to what Trump’s second term means for Washington, business and the world
The writer is the former deputy prime minister of Canada
The Supreme Court’s tariffs decision on Friday gives the US and its allies the chance for a reset. “Liberation day” tariffs imposed in April, and the ineffective international reaction to them, hurt regular Americans and strained the country’s relationship with its closest friends. The Supreme Court’s ruling offers a rare opportunity to fix that historic error. If they are smart, leaders on both sides of the aisle in Washington, and on both sides of the Atlantic, will seize it.
A reset needs to start with something America’s bruised and insulted allies may be loath to admit: when he first burst on to the US national political scene, President Donald Trump was right to say the global trading system wasn’t working for working people in the US. And it wasn’t working for working people in much of the rich, industrialised world either.
A permanently imbalanced global economy, in which the world’s advanced manufactured goods are mostly made and increasingly invented in China, is not politically sustainable for the democracies of the west. Nor is it a good deal for China’s people, who continue to be asked to consume less than they earn, for the sake of risky geoeconomic dominance.
That truth at the heart of Washington’s trade policy could be the beginning of a transatlantic reset. While Europe has long paid polite lip-service to American concerns about Chinese overcapacity, over the past year, the China Shock has crossed the Atlantic. Blocked by tariffs from the rich American market, subsidised Chinese exports including wind turbines, industrial chemicals and EVs are hitting Europe hard.
A reset built around shared action on Chinese overcapacity would be a political victory for the White House — and it would be good for working people on both sides of the Atlantic.
But while a transatlantic trade pact on China makes sense for Americans, and it makes sense for the world, Europe and its friends shouldn’t assume it will be an easy sell in Washington. That’s because somewhere between the first Trump administration, when the president built a bipartisan consensus on China and when I represented Canada in the renegotiation of a North American trade agreement he rightly called “the best trade deal ever,” Trump went from using tariffs as a tool to recalibrate an off-kilter global trading system to an all-purpose weapon of predatory global hegemony, wielded with as much, or more, zeal against friends as against foes.
America’s allies were the unwitting midwives of that transformation, when they surprised Wall Street and even some voices in the White House by acquiescing to tariffs last year. Much of the market opposition to tariffs was based on the assumption that the world would fight back. China did, but the rest of the world, led by America’s closest allies, largely capitulated when they should have retaliated.
Weakness is a provocation. Appeasement by America’s allies didn’t mollify Trump. It emboldened him to press further, moving from tariffs to territory. The Taco trade is a misnomer. The president doesn’t always chicken out. He is a much cannier negotiator than his critics will allow. He pushes until he meets resistance — and that approach often gets him a much better deal than more traditional analysts imagined possible.
The Supreme Court ruling has given America’s partners a golden opportunity to reset the transatlantic relationship and correct the miscalculation of last spring. They could give the White House a win on China, and American consumers some welcome relief by offering a common front on Beijing in exchange for friendshoring with allies. But to do that, they need to learn the Art of the Deal and take a page from the president’s hardball playbook. That means a careful, co-ordinated retaliation plan, alongside an attractive off-ramp. Imitation is, after all, the sincerest form of flattery.
