American businesses will at some point also start to feel the pain of trade wars

US PRESIDENT Donald Trump once stated that "trade wars are good", and "easy to win". And it seems he believes that with the US economy growing faster than expected while its key trading partners are confronting economic problems, the United States is now in a stronger position to embrace a more aggressive protectionist strategy - and that it would be "easy to win" these trade wars.

It is true that with exports accounting for only 12 per cent of American gross domestic product (GDP), the United States would be less affected by the jolts produced by trade rows than, say, the European Union (EU) where exports constitute 37 per cent of the bloc's total GDP. Moreover, the American economy is expanding this year at the fastest pace in a decade, driven by rising domestic consumer spending, with some economists forecasting growth of close to 5 per cent by the end of 2018. This remarkable economic growth has been accelerated in response to the large tax cuts and spending bills approved by Congress and the Trump administration's steps to deregulate the economy, applauded by Corporate America and by a bullish stock market.

From that perspective, the Trump administration believes that it is in a position to "win" the trade wars that could be triggered by its decisions to slap 25 per cent tariffs on US$50 billion worth of Chinese goods and a similar levy on steel, and 10 per cent tariffs on aluminium imported from the EU and other economies, and its plan to raise the tariffs on European vehicle and vehicle-part imports. In response, China has announced a retaliatory 25 per cent tariff on US$50 billion worth of US products while the EU reciprocated with tariffs on US$3.2 billion of American goods.

But then China exports around US$500 billion a year to America, and imports only about US$130 billion from it, mostly raw materials. That makes the Chinese economy more vulnerable to American protectionist moves, especially at a time when there are mounting concerns that growth in the world's second biggest economy is cooling faster than previously expected.

At the same time, the EU trade dispute with the United States is occurring against a backdrop of slowing economic growth in the region, aggravated by Britain's decision to leave the bloc and political pressure in other countries to follow its lead. The economic growth of the EU, and in particular of Germany, depends very much on continued access to the American import market. In fact, raising US tariffs on European car imports could devastate the German car industry.

But even under the rosiest economic scenario, the US economy would not be immune to the effects of trade wars. The Chinese and the Europeans have targeted tariffs on products manufactured in Republican-leaning states, and could end up producing a political backlash against the White House. Yet what should worry US policymakers the most is the negative impact that the evolving trade tensions would have on the entire global economy, by disrupting global supply lines and creating uncertainty among American and non-American companies, and affecting their decisions, including on hiring new workers, not to mention the long-term threat that trade wars pose to the open trade system that has allowed the global economy to grow since 1945.

This means that at some point, American businesses would also start feeling the pain caused by these trade wars - especially if and when US economic growth slows to a halt.