Opinion | Why the U.S. Could Come Out Ahead in a Tariff War

The world is bracing for Donald Trump’s tariffs and doesn’t think he’s bluffing.

On my trips to Beijing in recent years, Chinese officials often seemed confident they could work with someone who was a businessman at heart. That confidence seems to be a thing of the past. Both U.S. political parties have turned antagonistic, and Mr. Trump seems in a far less conciliatory mood. He has vowed to add 10 percent to the tariff on imports from China and impose 25 percent tariffs on imports from Canada and Mexico, the two largest U.S. trading partners.

Perhaps it’s because he has a stronger hand. President Biden is handing off a strong economy while much of the rest of the world is in a deep economic funk, making the United States better positioned to manage the fallout from a tariff war. No matter the virtues of these policies, they could end up hurting other countries a lot more than they hurt American consumers, making the United States look like a winner.

The performance of the U.S. stock market is the metric that Mr. Trump seems to rely on most to gauge the success of his policies, and it has been stellar, far outstripping the performance of most other countries’. Tariffs, along with tighter immigration policies, are likely to cause a resurgence in U.S. inflation. But the United States has enjoyed strong productivity growth, even as productivity in other countries has been dismal. If that continues, which could hold down broader inflation, the pain inflicted by tariffs on U.S. consumers and businesses will be reduced.

The imposition of tariffs is likely to mean a stronger U.S. dollar, which will make American exports more expensive. That undercuts Mr. Trump’s goal of reducing the trade deficit, but it will also pull in more investment from the rest of the world.

The field of battle has shifted in other ways, too. At the start of the first Trump presidency, China’s economy was powering along, with an annual growth rate of around 7 percent. This year and next, China will be hard put to achieve a 5 percent growth rate. A spiraling property market, perilous local government finances, a shrinking labor force and brittle consumer confidence are making things worse. With Chinese household spending weaker than that of households in other countries, China has become much more reliant on exports.

Europe, a key trading partner of both the United States and China, is in even more dire straits. The two most populous countries in the eurozone, Germany and France, are beleaguered by political instability and floundering economies. Elsewhere, Japan and Britain are mired in low growth, and even the roaring Indian economy is losing steam.