New tariffs on Chinese imports went into effect only on July 6, so it is too early to say how the trade war is going and which country, if any, will win it. Even the most die-hard free trader should admit that in theory it is possible that the threat of tariffs can induce other countries to make concessions that leave us (and possibly them) better off. Lose-lose scenarios are, however, also all too possible. What we can say with certainty is that we are learning four rules for conducting a trade war, Donald Trump-style. First: Assume that you will win it effortlessly. In March, Trump trade adviser Peter Navarro predicted that no country would retaliate against our tariffs. His reasoning: We’re the biggest market in the world, so other countries have too much to lose. Refusing to co-operate with this theory, Canada, China, the EU and Mexico have all imposed retaliatory tariffs. Trump himself has made the closely related argument that our trade deficit guarantees our success, because ...
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