US President Donald Trump’s trade war with China is following a familiar path

It has been nearly a year since Donald Trump infamously tweeted that “trade wars are good, and easy to win,” adding, for extra emphasis, “it’s easy!”

How things change.

America’s most enthusiastically protectionist modern-day President isn’t finding talks with China so simple after all. This week he rowed back on a supposedly-hard deadline that was intended to force the Chinese government into a serious of climbdowns.

“I could see myself letting that slide for a little while,” Trump said, delighting Wall Street.

The Dow Jones is up substantially from its Christmas crash, gaining around 3,700 points, and has been boosted in the last couple of days by a growing belief that the White House will not follow through on threats of a full on trade war. Risk assets have also gained from recent developments around the US government shutdown and the seemingly-doomed plan for larger Mexican border defences. Could it be that investors are wise to Trump’s habit of creating a crisis and pretending to play hardball before ultimately backing down? Politically, he is often able to convince his supporters that he has won – or at least fought hard on their behalf – thus giving no reason to believe he will change tack.

Former Goldman Sachs banker and current Treasury secretary Steve Mnuchin continues negotiations in China today, alongside hawkish US trade representative Robert Lighthizer. The pair are expected to meet Chinese vice premier Liu He, before an expected showdown between Trump and President Xi Jinping at some stage in the comings weeks. That summit is being lined up to take place at Trump’s garish Florida residence Mar-a-Lago, with White House spokespeople already arguing that only Trump will be able to solve the impasse.

Such staging has all the hallmarks of a Trump stunt – one can expect the photocalls to culminate in a resolution heralded as a major breakthrough and great victory for the average American. Rhetoric aside, we must hope this is the case and that the world economy is spared a trade war that could have devastating consequences. Bank of England governor Mark Carney used a speech on Tuesday to warn against the risks to global growth if protectionism takes hold, and he concluded with a not-so-subtle dig at the American President, telling his City audience: “Contrary to what you might have heard, it isn’t easy to win a trade war.”