We’ve been warning for two years that trade wars have economic consequences, but the wizards of protectionism told Mr. Trump not to worry. The economy was fine and the trade worrywarts were wrong.
But we never said tariffs would produce immediate recession. We said they—and the climate of uncertainty they were creating for business—would chill global trade and undermine the surge in capital investment spurred by tax reform and deregulation. The growth momentum from tax cuts and a strong labor market were able to mask the impact of helter-skelter trade policy for a time. But that old economic disciplinarian, Adam Smith, sooner or later exacts a price for policy blunders.
Wednesday’s market moves are an omen of the future, not destiny. The key to avoiding the worst is to restore a sense of policy calm and confidence. Stop the trade threats by tweet. Call a tariff truce with China, Europe and the rest of the world while negotiations resume with a goal of reaching a deal by the meeting of Pacific nations in November. Someone should tell Mr. Trump that incumbent Presidents who preside over recessions within two years of an election rarely get a second term.