What Happens If Trump Starts A Trade War? The Winners And Losers Of International Economic Conflict

On his second full day in office, President Donald Trump announced Tuesday he would make good on his campaign promise to renegotiate a decades-old free trade agreement with the U.S.' neighbors. The news came only one day after the new president ditched a pan-Pacific trade deal proposed by his predecessor.

Trump has repeatedly called for better trade deals with other countries, accusing the existing system of hurting domestic jobs by incentivizing companies to outsource for cheaper labor. Even before his presidency, Trumpt took to social media to call out automakers such as Toyota, General Motors and Ford for pursuing plans to build cars in Mexico, which enjoys tariff-free trade with the U.S. and Canada as part of the North American Free Trade Agreement (NAFTA). Trump threatened the car companies with "a big border tax" for as much as 35 percent for imported vehicles.

While Trump has yet to offer the specifics of his plans and alternatives to the current international trade regime, his stated goal of boosting U.S. labor has resounded for his supporters. Ford CEO Mark Fields made headlines earlier this month when he canceled plans to build a $1.6 billion plant in Mexico and instead chose to invest $700 million in the company's Michigan location, citing a "more positive manufacturing environment" under Trump. The move would create an estimated 700 jobs, bolstering Trump's efforts to revive the auto industry, which has lost some 350,000 jobs since NAFTA was signed in 1994. Critics, however, have said Trump's move may actually hurt U.S. workers.

Trump supporting states including Michigan, Texas, North Dakota, Kentucky and Indiana were among the most heavily dependent on commerce from Mexico or Canada. Increased restrictions and the possibility of retaliatory trade measures would likely damage local industries, which rely on foreign markets eager to buy U.S. goods. Withdrawing from NAFTA and implementing the 35 percent border tax could result in the loss of 31,000 auto jobs, according to the non-profit Center for Automative Research based in Ann Arbor, Michigan.

Monday's repeal of the Trans-Pacific Partnership (TPP), negotiated between former President Barack Obama and 11 other countries, was celebrated by an unlikely union of both Trump supporters and progressives. Former Democratic presidential candidate and influential leftist icon Senator Bernie Sanders of Vermont said he was "glad" Trump repealed the TPP, which would be responsible for a "race to the bottom" that hurt U.S. workers. The agreement was seen by supporters as an attempt to counter Chinese economic might in the Pacific and enhance ties with regional allies, but critics accused it of being non-transparent and only serving the interests of big business at the expense of U.S. jobs.

China, which opposed the TPP to begin with, has had its own problems with Trump's trade talk. The president frequently launched accusations of dishonest trade practices including currency manipulation at Beijing and has suggested imposing tariffs as high as 45 percent on the world's second-largest economy, behind the U.S. If it came down to war of tariffs, China has even suggested it would best the U.S. because it has shifted the focus of its economy away from the global market and toward domestic consumption. Many economists agree Chinese and U.S. markets would take a blow during a trade war, however, the U.S. may have more to lose at this point as its top companies are more dependent on China than the other way around.