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Trade wars and wily old Trump

The trade wars are now in full swing.

Donald Trump has come out with all guns blazing, whacking tariffs on goods purchased from Canada, Mexico and China.

Canada and China have retaliated by placing tariffs of their own on US imports and in some cases, levies on exports to the USA.

The situation has upended the operations of many businesses, especially smaller businesses which don't carry large stocks of crucial materials themselves and hence have no buffer against the dramatic increases in costs these tariffs produce.

Could this be a windfall for New Zealand?

I believe we are well placed to benefit from all this tit-for-tat action in the Northern Hemisphere.

Since Trump just hiked tariffs on imports of steel and aluminium from Canada there might be an opportunity for us to boost our own exports of these metals into the US market. The value of these exports varies but has been as much as US$1.4 billion in recent years, although only a tiny fraction of that has, to date, been to the USA.

The 20 percent tariff the US has placed on imports from China could also benefit us here in Godzone.

With the USA being China's largest single market, a slump in demand caused by these tariffs could see China actively promoting its wares in other markets, such as ours. With luck, this promotion will include a reduction in prices as a strategy for boosting sales. That cheap Sino-tat from AliExpress or Temu could become even cheaper in the months to come.

Even our manufactured exports could see extra demand from the USA, if tariffs force prices up for products made in countries against which tariffs have been applied.

However, I don't see these trade wars lasting very long at all.

It strikes me that Trump's strategy in almost all things is deceptively simple, whether it be trade or striking peace deals.

He wades in with all guns blazing, threatening outrageous things -- such as the 50 percent tariff on Canadian metal imports and cozying up to Putin.

This unsettles and, to a degree, disorients the parties involved. They don't understand what he's doing or why. To the naive, he appears unpredictable and unhinged.

However, I believe he's simply using the old strategy of demanding far more than you expect to get -- then settling for what you originally wanted.

This is an ancient technique that allows all parties to claim victory, whilst still allowing the likes of Trump to achieve his goals without protracted haggling or bargaining.

In the Ukraine/Russia situation for instance... Trump appears to have aligned himself with Putin to an unsettling degree. This makes Putin feel more empowered and creates the illusion that Trump is an ally and a friend. When dealing with "friends" we are far more likely to make concessions that would not have been considered when dealing with a foe. This gives Trump the upper hand when negotiating with Russia. There is also the factor that having publicly embraced Trump's position, Putin would be losing face if he changed his stance, even when forced to make otherwise unpalatable concessions.

From the Ukraine perspective, Trump is seen as someone who is strong and brutal, willing to do whatever it takes to achieve his goals. That's disempowering when, as Trump says, "you don't have any cards". From Ukraine's perspective therefore, any ground that Trump concedes is seen as a win, a victory.

Now, by creating a middle-ground proposal, Trump could appear to appease both sides while effectively having them think they've won some ground.

Anyone who has studied psychology and done any amount of negotiation will recognise this play for what it is.

With this in mind, I believe that Trump is either a very clever man who is playing this game with consumate skill and aplomb -- or he may just be a bumbling idiot. Only time will tell which of these is the correct summation.

The sad thing is that I see so many of his adversaries failing to see exactly how they are being manipulated and played by the US president. They are indeed falling for his strategy and playing the game exactly as you would expect a naive opponent to do.

To be honest, it's no wonder the world is in the sorry state it presently is. Most world leaders have little idea what's happening to them under the Trump administration.

Perhaps a psychology degree should be a minimum qualification for anyone involved in such leadership rolls?

Ah well, for the rest of us it makes great entertainment -- although I'd hate to be a small business trying to stay afloat in the USA right now. The very viability of such businesses seems to wax and wane on an almost daily basis according to the latest presidential decree.

Carpe Diem folks!

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