Opinion | This Is Who Loses in a Trade War

For decades, the rest of the world, especially China and countries in Europe, have produced much more than they have consumed, selling goods to America in exchange for an ever-growing pile of U.S.dollars.

This could happen because the United States consumes much more than it produces, gobbling up the difference in the form of persistent trade deficits, and financing those deficits with debt, which Chinese and European investors are happy to buy.President Trump is unwilling to accept this state of affairs.His administration has accelerated a shift to what my colleagues and I at the investment management firm Bridgewater Associates call modern mercantilism: the view that trade deficits are a threat to national wealth and strength.Mr.

Trump and many of his supporters believe that persistent trade deficits have made America dangerously dependent on other economies, put national security at risk and undermined stable middle-class work.That’s the primary reason he is imposing tariffs and adopting other policies that are in the headlines today.While modern mercantilist policies are meant to counter all American competitors, they pose a particularly severe threat to Europe’s economic engine.

If the United States is unwilling to continue to run big trade deficits, it means that the “pie” available to everyone else to produce more than they consume is shrinking.But this challenge could finally push the region toward urgently needed change and economic revitalization.After Mr.

Trump’s recent actions and comments on Ukraine, Europe has abruptly realized that it can no longer rely on the United States for security; the region needs to acknowledge that it can’t rely on the U.S.for economic stability, either.The United States has the upper hand in this trade conflict precisely because it currently runs large trade deficits.

It has more imports to tariff than exports, and it has more to gain should American companies respond by increasing domestic investment and br...