IN A YouTube video released on November 22nd, Donald Trump—seated in front of an American flag and a leonine statue—confirmed his plan to put America first, “whether it’s producing steel, building cars or curing disease”. Mr Trump has already arm-twisted Carrier, a maker of airconditioning units in Indiana, to keep 800 jobs in the state rather than move them to Mexico. His transition team is preparing a list of “executive actions we can take on day one to restore our laws and bring back our jobs”. Implicit in the video was Mr Trump’s view of international trade: a patriotic contest in which countries strive to take each other’s jobs—or seize them back.

In Mr Trump’s view of the world, trade deals are adversarial and zero-sum. Other countries are rivals competing for the same spoils, not trading partners enjoying mutually beneficial exchange. His plans to scupper the Trans-Pacific Partnership (TPP), a deal painstakingly negotiated over ten years with 11 other countries around the Pacific Rim, tally with Mr Trump’s reading of history. Too often, he thinks, bad deals, like the North American Free-Trade Agreement (NAFTA) and China’s accession to the World Trade Organisation (WTO), have destroyed American jobs and created American losers.

For Mr Trump, evidence of this pilfering lies in America’s trade deficit, which is most dramatic for goods (see chart 1). “China is both the biggest trade cheater in the world and [the] country with which the US runs its largest trade deficit,” wrote Wilbur Ross, Mr Trump’s pick as commerce secretary, and Peter Navarro, a senior adviser to his campaign, in September in a description of the next president’s economic plan. Mr Ross has said he wants to “spread the trade-deficit issue around the globe”. The trade misery that Mr Trump laments is recognisable to Nate LaMar, a sales manager at Draper Inc, which makes window shades, projector screens and gym equipment. He remembers his home state of Indiana being hit hard by job losses as the car and steel industries collapsed 15-20 years ago. Even in his own company, it “felt like we were floating down a river towards a waterfall”. Chinese competition encroached on their export orders first, and then their domestic customers, flooding the bottom end of the market with cheap imports.

No one knows exactly what President Trump’s trade policy will look like—perhaps not even Mr Trump himself. His alarm about foreign competition, and his suspicion of trade deals, runs deep in his rhetoric, permeating his stump speeches. But even many of his supporters hope that he will stop short of some of his more radical campaign pledges. Mr LaMar is one of them. “I’m hoping cooler heads will prevail,” he says, naming Mike Pence, the vice-president-elect and a free-trade advocate.

Many of Mr Trump’s picks suggest radicalism, however. According to a transition-team press release, Mr Trump’s cabinet choices “signal a seismic and transformative shift in trade policy”. His personnel hint at an aggressive stance against Chinese steel in particular. The transition team includes Dan DiMicco, former boss of Nucor Steel, and Robert Lighthizer, a trade lawyer who has built a career arguing for higher steel tariffs, and is known in trade-policy circles as “the most protectionist guy in Washington”.

If hotter heads do win out, how far might Mr Trump go? Protectionism around the world is creeping up (see chart 2 ). But if Mr Trump follows through on his promises, that trend will be turbocharged. He has threatened to withdraw from NAFTA (“the worst trade deal maybe ever signed anywhere”, he insists). On December 4th he tweeted that there would be a tax of 35% on firms that fired employees, built a factory in another country and then tried to sell their products back across the border. He plans to label China as a currency manipulator on his first day in office and has threatened tariffs of 45% on its products. Many foreigners blithely assume that America’s system of checks and balances will stymie Mr Trump’s more radical tendencies. But for trade, those checks and balances are weak. The president would have huge power to carry out his threats, at least in the short term. Under the Trade Act of 1974 he could impose quotas or a tariff of up to 15% for up to 150 days against countries with large balance-of-payments surpluses (which modern courts would probably interpret as the current-account surplus). And if Mr Trump were to declare a state of national emergency, the scope of his presidential power would extend to all forms of international trade.

Never settle

Mr Trump’s actions could eventually be challenged in American courts. Plaintiffs might claim that he was violating constitutional freedoms or defying the original intention of the laws he would invoke. But Mr Trump may have the legal upper hand. American courts may not intervene to stop a trade war. America’s multilateral trade agreements are also more fragile than they appear. To renegotiate NAFTA, Mr Trump would require approval from Congress. To withdraw from it altogether, he would simply have to give the other partners six months’ notice.

After America’s formal departure, its NAFTA commitments would live on, enshrined in the domestic legislation that implemented them. But those commitments need not restrain a determined president. After merely “consulting” Congress, he could abandon NAFTA’s (mostly) zero duties and instead impose the WTO’s “most favoured nation” tariff rates on Mexican imports, according to Gary Hufbauer of the Peterson Institute for International Economics, a think-tank. For clothing and footwear, these tariffs are high. But on average, they are low: only 3.5%—not very satisfying for a budding trade warrior. He could avail himself of much tougher tariffs by accusing Mexico (or indeed China) of various kinds of cheating: such as subsidising their exports illegally or dumping products on the American markets below cost. Mexico or China could appeal to the WTO, but that would take time. The WTO’s dispute-settlement mechanism is weighed down by a backlog of cases.

If Mr Trump did impose tariffs of 35-45%, the Mexican and Chinese governments would not wait for the WTO’s courts to intervene. They would retaliate. China could cancel contracts with the likes of Boeing, an American plane manufacturer, or disrupt Apple’s supply chain. China is a big customer for some American products. It accounted for roughly 60% of America’s soyabean exports between 2013 and 2015. In a trade war, it could cut these purchases.

After economists at the Peterson Institute highlighted this possibility, team Trump dismissed the analysis as “project fear”. “If China cuts off American farmers, Chinese people will go hungry,” they scoffed. But other countries, such as Argentina or Brazil, produce soyabeans. Switching could be relatively straightforward.

As well as blocking American goods at its borders, China could squeeze the many American firms operating within them. General Motors and its affiliates, for example, sold 372,000 cars in China in November, compared with just 253,000 in its domestic market. In Mr Trump’s own words: “leverage: don’t make deals without it.”

Imposing a punitive tariff on American firms operating in Mexico would be even more disruptive. Under NAFTA, companies have sprawled across the border. “We make things together in North America,” says John Weekes, Canada’s original NAFTA negotiator. Every dollar of Mexican exports to America contains around 40 cents of American output embedded within it. Tariffs of the level that Mr Trump suggests would be so disruptive that Luis de la Calle, a Mexican economist, doubts that they are credible. When it comes to car production, “you cannot run a plant in Michigan without Mexican imports,” he says.

If Mr Trump were to press ahead with his tariffs, the Mexican authorities would first try to find a smart response. They have had some practice. After years of the Americans failing to allow Mexican lorries to cross the border as easily as NAFTA stipulated, in 2009 the Mexicans imposed duties on, among other things, Christmas trees from Oregon. Not coincidentally, the state’s congressional delegation includes a member of the transportation committee. But in an escalating trade war it would be hard to pick a duty that would not backfire. If Mexico stopped importing American car parts, for example, it would hurt its own assembly lines. Retaliation might take unconventional forms. Turning a blind eye to outgoing migrants could rile Mr Trump more than duties on American goods.

Most tariffs backfire, hurting the country that imposes them by raising prices, blunting competition and depriving consumers of choice. In September the Peterson Institute predicted that a symmetric trade war, in which Mexican and Chinese imposed equal tariffs on American exports as America did on their exports, would ripple through the American economy, lowering private-sector employment by nearly 4.8m, or more than 4% by 2019.

Despite domestic and international restraints, Mr Trump would, then, be fully able to start a ruinous trade war. But would he be willing to do so? It could be that his threats to tear up trade agreements and raise tariffs are simply bargaining chips, designed to force governments to the negotiating table. In his book, “The Art of the Deal”, Mr Trump explained that his style of dealmaking is quite simple. “I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.”

Volunteer, or else

What, then, is he after? In his approach to trade dealmaking, Mr Trump might take inspiration from history. When Ronald Reagan was faced with a big trade deficit with Japan, he browbeat Japan’s carmakers (among others) into restraining their exports “voluntarily” (see article). But life was simpler under Reagan. He could negotiate with a handful of Japanese firms that made their goods in Japan and sold them in America. Today, parts and components criss-cross borders and a great deal of trade happens within firms. “The information you need to have to be able to act strategically seems to me to be daunting,” says Chad Bown, a trade expert. Reagan’s tactics also had unintended consequences. With only a fixed number of cars to sell, Japanese producers innovated and moved into more profitable higher-end products.

Mr Trump is keen to increase exports and not just block imports. Indeed, his team may see the threat of import tariffs as a means to prise open foreign markets. Mr Ross believes that China, Japan and Germany should import more liquefied natural gas from America, rather than the Gulf. He also believes that China should relax its import quotas for cotton (although why China would add more imports to its mountain of surplus cotton is not clear).

The Trump team’s approach also seems distinctively granular, hands-on and micro-managerial. They are happy to pursue specific commercial outcomes, rather than creating fruitful commercial frameworks. Instead of writing the rules of the game, within which companies are free to make choices, they seem keen to negotiate the outcome of the game: additional cotton exports to China, greater LNG sales to Japan, more Carrier jobs in Indiana.

In their view, the success of these deals is measured by the trade balance that results. Trade deficits are intrinsically bad, they seem to think—a sign the country is losing. Part of the issue is the way trade figures are calculated. Mr Trump is right to point out that Chinese exports account for a large and rising share of America’s total trade deficit in goods. But China’s status as the world’s factory means that much of the value embedded in those exports is in fact coming from America itself. An iPhone shipped from China to America contributes to the Chinese trade surplus, but also Apple shareholders’ bank balances. According to Deutsche Bank, on a value-added basis, China accounts for only around 16.4% of America’s trade deficit in goods (see chart 3). Whether trade deficits are good or bad, trade deals are best seen as a way of raising trade flows in both directions, rather than an instrument for turning deficits into surpluses. According to mainstream economics, a country’s overall balance of trade is more powerfully influenced by macroeconomic forces, such as the strength of demand and the currency. Targeting a bilateral deficit using bilateral tariffs is “a terrible idea”, says Douglas Irwin, author of “Free Trade Under Fire”. But more targeted options exist. A tough stance on Chinese steel is more justifiable than a general crackdown on imports, for example. “It’s crystal clear that China is subsidising their steel industry,” says Mr Irwin.