With Donald Trump back in the White House, tariffs have become front-page news, and advocates for free trade find themselves on the back foot. Is this a passing phase, or a permanent shift?
Soumaya Keynes and Chad Bown argue that with great powers now using trade as a weapon, there can be no simple return to the settled order of rules-based global trade that dominated the late twentieth century. Their new book, ‘How to Win a Trade War’, provides a tour through the toolkit of the trade warrior.
In this week’s episode of the CapX podcast they join me to discuss the new world of economic conflict, why tariffs are like a party drug – and how trade wars can still spiral out of control.
Below, you’ll find two short transcripts from our conversation.
Marc Sidwell
Editor, CapX
Chad Bown: How China weaponised trade
China fundamentally has a different view of international trade and interdependence that has become increasingly clear over time.
And maybe the sharpest articulation of this was President Xi Jinping in his dual circulation speech, which happened around 2020 or so, where he said that he envisions a world where the rest of the world becomes dependent on China for their supply chains. But China is not dependent on the rest of the world for its supply chains.
And when you think about what really is underpinning a rules-based trading system, it is a willingness to be interdependent with one another, right? I export to you and yeah, we’ll have frictions, but generally we will engage in this trade.
And with that, China was signalling, no, we want a very asymmetric relationship. We want to live in a world where you’re dependent on us. We’re not dependent on you. And then sometimes we’re actually going to weaponise that. And we’re going to take advantage of your dependencies on us to get our way.
And that, I think, is something that’s different. So when we’re talking about economic security now, it’s not just dual-use goods and military security and bombs and missiles and things like that. It’s really the ability to weaponise features of our fundamental economies that we have to deal with.
Soumaya Keynes: A lesson from Britain’s cable empire
My favourite example is Britain’s dominance in telegraph cables at the end of the 19th century.
So we were massively dominant, we effectively controlled international communications networks.
We could surveil other countries. We could censor other governments’ communications. And those other governments hated it.
When we abused our power, when we censored their communications, they said, nope, we don’t like that. We’re going to try to build rival networks. We’re going to turn to wireless communication technology. We’re going to wriggle around.
But what ended up happening is that the advantages that we had, that Britain had, as this dominant provider of telegraph cables, the factors that set up that initial dominance were the same factors that made it really hard to find alternatives.
And then the other thing is that Britain moved to prevent those rival networks being set up.
So actually the end of that story – and there’s a lot more detail in the book – but the end of that story, is it took decades for Britain’s dominance in communications to be truly destroyed.
