Napoleon’s Trade War Advice for Trump

It was December 2, 1805. The fields of Austerlitz were cloaked in fog.

Napoleon Bonaparte outnumbered and ostensibly retreating, faced the combined might of the Austrian and Russian imperial armies.

The Allies believed they had him cornered. They saw the French emperor’s lines thinning and his forces retreating from a key high ground, the Pratzen Heights. Sensing an opportunity, they charged forward, confident that victory was within their grasp.

Yet, what unfolded next would shatter their hopes. As the Allies surged, Napoleon unleashed a meticulously planned counteroffensive, splitting their forces and driving thousands of soldiers onto a frozen lake. When French artillery rained cannonballs onto the fragile ice, it gave way, and entire regiments plunged into the freezing waters below.

Austerlitz, later immortalized as the “Battle of the Three Emperors,” was not just a triumph of force but of strategy, deception, and preparation.

Fast forward to the 21st century, and the fog of war has moved from battlefields to boardrooms and global markets. The U.S.-China trade war is a modern-day Austerlitz, where tariffs and currency maneuvers have replaced cannonballs and cavalry charges.

In 2018, when Donald Trump levied tariffs on Chinese goods, it was an ambush reminiscent of the Allied assault on Napoleon’s ostensibly weakened forces. Trump saw an opening to weaken China’s economic dominance. He expected the tariffs to leave China vulnerable.

Initially, the move appeared to succeed. China’s exports faltered, its stock markets stumbled, and Beijing scrambled to contain the damage. But, like Napoleon retreating to draw his enemies into a trap, China was not as vulnerable as it seemed.

Over the years, China has hardened its economic defenses, just as Napoleon meticulously prepared his army before Austerlitz.

President Xi Jinping’s government has shifted its trade strategies to flood emerging markets with exports, ensuring a broader base of demand. By devaluing the yuan, Beijing made Chinese goods cheaper abroad, effectively neutralizing the tariffs’ impact.

This currency manipulation acted like Napoleon’s cannon fire on the ice, destabilizing U.S. manufacturers and forcing global competitors to operate on China’s terms.

The infamous “China price” has become a weapon as potent as any artillery barrage, undercutting rivals and consolidating Beijing’s control over key industries.

Much like Napoleon’s use of terrain, China has exploited the dynamics of the global economy to its advantage.

Trump, for all his strengths and his admirable vision back toward a more just, sustainable U.S. economy, finds himself in a position not unlike the Allies at Austerlitz – overextended and overly confident in its initial moves.

The belief that tariffs alone could cripple China underestimated Beijing’s resilience and capacity for adaptation. Chinese leaders, like Napoleon, understand the importance of timing and preparation. They have avoided direct confrontation, opting instead for a strategy of attrition, flooding global markets with inexpensive goods and undercutting U.S. industries.

Meanwhile, the devaluation of the yuan functions as a defensive maneuver, absorbing economic shocks and allowing Chinese exporters to remain competitive despite the tariffs.

But the parallels between Austerlitz and the trade war extend beyond strategy. They also give us critical lessons about the risks of hubris and the power of long-term planning.

Napoleon’s genius lay not only in his military tactics but in his ability to see several moves ahead, anticipating and exploiting the overconfidence of his enemies.

Similarly, China’s strategy demonstrates a long view of economic warfare, one that prioritizes resilience and adaptability over immediate victories. By diversifying its trade partners and pouring national resources into its manufacturing base, Beijing has created a buffer against the economic pressures imposed by Washington.

The United States, on the other hand, risks repeating the Allies’ mistakes. Overreliance on the dollar’s dominance, combined with political and economic fragmentation at home, has left Trump vulnerable to counterattacks.

Just as the Allies underestimated Napoleon’s ability to strike decisively, Trump has underestimated China’s capacity to absorb blows and retaliate in ways that reshape the global economic landscape.

The fog of economic war cloaks the real strengths and weaknesses of each side, making it all the more crucial to understand the dynamics at play.

At Austerlitz, Napoleon turned the tide of battle with a single decisive move – the destruction of the ice-bound lake that swallowed thousands of Allied soldiers. This dramatic moment was memorably recreated in Ridley Scott’s 2023 film Napoleon. Scott showed the unpredictable, surprising nature of warfare.

Similarly, in the trade war, a single misstep – whether a poorly calibrated tariff, an underappreciation of China’s control over supply chains, or a financial crisis – could shatter the fragile balance of power.

Both sides are vying for dominance in a global economy that increasingly resembles the thin ice of that fateful battlefield.

What if Napoleon could give strategic advice to Trump? Let’s imagine.

First, he would likely stress the importance of understanding the opponent’s true strengths and weaknesses. Just as Napoleon studied the terrain and movements of his enemies, Trump must conduct a comprehensive assessment of China’s economic vulnerabilities and strengths rather than relying on outdated assumptions.

Second, Napoleon would advise against overextension. He understood that no force, no matter how powerful, can win if it spreads itself too thin. For Trump, this means focusing on shoring up his own economic foundations – investing in domestic manufacturing, securing critical supply chains, and strengthening alliances with other nations to counterbalance China’s global influence. Trump also risks spreading himself too thin if he spends his time and attention encouraging financial market bubbles that risk misallocating scarce capital.

Finally, Napoleon would emphasize the importance of timing and decisive strikes. Just as he waited for the perfect moment to counterattack at Austerlitz, Trump must be patient and deliberate in his strategy.

Will tariffs with thousands of Commerce Department exemptions be a decisive strike? Or will China view them as bluffs, based on the 2018 experience, as it sets up shell companies in Vietnam and Mexico?

It’s hard for me to imagine tariffs being successful in achieving Trump’s goals without at least temporary pain and restructuring in the way many global companies do business.

Finally, Napoleon might remind Trump, “Never invade Russia, or shoot missiles at it, in the winter… or in the spring, for that matter.”

Although Trump, unlike Joe Biden, long ago realized that extending the Russia-Ukraine conflict, rather than urging peace talks, is one of the most tragic, wasteful, and stupid decisions in history.

Editor’s note: Members of Jim Rickards’ Strategic Intelligence Pro can read the rest of Dan’s research, along with the accompanying stock pick, here.