Trump Is Right: The U.S. Can’t Lose a Trade War - Source The National Interest

If President Trump is right about one thing, it's that when you have a trade deficit of half a trillion dollars, you can't lose a trade war.

The conventional wisdom of the international expert class is that “you can't win a trade war.” What they really mean is that you can't win a trade war in a fair game . If all sides start in balance, the rules are the same for everyone, and no player has coercive power over any other, the winning strategy is for everyone to cooperate. Economics 101.

But if one country starts with a massive trade deficit, the existing rules are written to favor its opponents. And when the country with the trade deficit just happens to be the most powerful country in the world, it's safe to say that there are multiple paths to victory.

Despite being widely ridiculed in the press, the homespun wisdom encapsulated in President Donald Trump's April 4 tweet that “When you’re already $500 Billion DOWN, you can’t lose!” is essentially correct. The only thing incorrect was the figure. The U.S. trade deficit was $568 billion in 2017, and that figure incorporates America's trade surplus in services. America's trade deficit in goods alone was a whopping $811 billion.

The headlines on April 4 blamed Trump for a 350-point intraday fall in the Dow Jones Industrial Average. They neglected to credit Trump's for the fact that by the close of trading the Dow was up 610 points on the day. In fact, over the three months of Trump's “trade war” to date, the Dow has been essentially flat (up 170 points).

Nor is market volatility particularly high. It's now back at 2015–2016 levels, after a particularly calm 2017. That's right: Trump's first year in office war marked by historically low stock market volatility. All in all, the Dow has risen more than 30 percent since Election Day, 2018. Ah, the perils of using the market as a guide to politics.