This is the first of a three-part series.                                     

In less than two years, the Trump administration has undermined more than seven decades of U.S. free trade legacies. That is both a reflection of and a catalyst for the further erosion of globalization.

Yet, these trade wars did not come out of the blue. The path to the tariff wars is becoming increasingly difficult to reverse or slow down, and the timing of the trade war could not be worse. It is taking place at a historical moment when global economic integration could further stagnate or even fall apart.

The Not-So-Fabulous Four

Today, Trump’s tariff wars are led by Peter Navarro, Director of the White House National Trade Council, and his ally and fellow Trump trade advisor Dan DiMicco, former CEO of the U.S. steel giant Nucor. They are supported by U.S. Trade Representative (USTR) Robert Lighthizer and Secretary of Commerce Wilbur Ross.

Until recently, the trade hawks in the White House had been contained by more mainstream policymakers, such as former Secretary of State Rex Tillerson, Director of the National Economic Council Gary Cohn, and Treasury Secretary Steve Mnuchin. After Tillerson lost his job and Cohn resigned, things changed. Cohn’s Goldman Sachs companion Mnuchin proved weaker, while Ross leaned on winners, regardless of the cause. As free-traders moved out, protectionists stepped in. 

The key ideas evolved from mercantilist economic doctrines, the Reagan era trade wars in the 1980s and more controversial moral hazards and financial dealings by Navarro and Ross, respectively. In the protectionist camp, the key players are Navarro and DiMicco, two vocal free trade critics, who have long been determined to prioritize steel at the expense of other U.S. industries.[1] Lighthizer is a Reagan era trade hawk who served as Deputy USTR in the ’80s, sees China as Japan 2.0 to be contained and would like to have the Republican Party become a party of tariffs as it once was.

Often called the “King of Bankruptcy,” Secretary of Commerce Wilbur Ross made his estimated $700 million in assets by buying bankrupt companies, especially in manufacturing and steel. A recent Forbes report indicates that allegations against Ross — which have sparked lawsuits, reimbursements and an SEC fine – come to more than $120 million: “If even half of the accusations are legitimate, the current United States secretary of commerce could rank among the biggest grifters in American history.”[2]

The Path to Trump’s Trade War(s)             

Historically, U.S. trade deficits stem from the 1970s, three decades prior to China’s rise. Moreover, the deficits are multilateral, not bilateral. They have prevailed more than four decades with Asia; first with Japan, then with the newly-industrialized Asian tigers, and most recently with China and multiple emerging Asian nations. At the same time, starting with Deng Xiaoping’s economic reforms, U.S.-China merchandise trade soared from $2 billion in 1979 to $579 billion in 2016 as China grew to become America’s second-largest merchandise trading partner, third-largest export market, and biggest source of imports. 

In the mid-1990s, the Clinton administration negotiated the North American Free Trade Agreement (NAFTA). In the early 2010s, the Obama administration touted – though failed to secure Congressional ratification for – the Trans-Pacific Partnership (TPP). On his inauguration day, Trump announced U.S. withdrawal from the TPP and pledged to renegotiate NAFTA. Following a year of tough campaign rhetoric against China, he began to walk the talk.