Trump’s Ace in the Hole in Trade War: A Strong Economy

The American economy has picked up speed and is now on course to expand this year at the fastest rate in more than a decade. That acceleration gives President Trump a stronger hand as he contemplates more tariffs and takes an increasingly confrontational approach with China, Canada, Mexico and other trading partners.

Economists have raised their growth estimates for the second quarter to an annualized rate of nearly 5 percent, more than double the pace of the previous period. Some economists say the figure could hit 3 percent for the full year, a level last reached in 2005.

As growth slows in Europe, China, Japan and elsewhere, the United States finds itself at the top of the global economy. The United States is also less exposed to the fallout from an escalating trade war since it does not rely on exports as much as other countries. It all gives Mr. Trump leverage with world leaders, potentially forcing them to make concessions.

But his threats could also backfire. Economists warn that the president’s clout is limited and that his attacks on the trading system could dampen the outlook not just in other countries but also domestically.

“If you have the strongest economy in years, then the trade shock appears manageable,” said Gregory Daco, head of United States economics at Oxford Economics. “However, with growth peaking, the trade shock will become more intense. With a global backdrop that is not improving anymore, we have to be careful about the back half of 2018 and 2019.”