We should not underestimate the seriousness of the trade war unfolding between the United States and the rest of the world.
Global trade is facing its biggest threat since the US introduced the Smoot-Hawley tariff in 1930, triggering a trade war that saw international trade decline by nearly two-thirds.
The US tariffs of 1930 exacerbated the Great Depression and devastated living standards for people around the world. Between 1929 and 1932, income per person in Australia fell 14 per cent.
The latest tranche of $US34 billion in US tariffs on Chinese imports has already seen proportionate, pre-announced retaliation from Beijing.
A further $US16 billion in US tariffs is in the pipeline for August, with the Trump administration threatening hundreds of billions more if China continues to retaliate.
This year has already seen some $US165 billion in US tariffs and retaliatory measures from other countries, based on calculations by the Peterson Institute.
Bluff and bluster before a deal?
Some see in the Trump administration's actions a calculated strategy to get other countries to lower their tariff barriers. They argue the threat and imposition of tariffs is bluff and bluster and trade agreements will ultimately be reached.
The problem with this view is that almost all of the trade negotiations the administration has entered into with other countries have ended in failure.
With the exception of the minimally renegotiated Korean-US Free Trade Agreement (KORUS), the US has failed to secure an agreement on any of the trade issues it has raised with China or other countries.
The attempt to renegotiate the North American Free Trade Agreement, one of the world's most successful free trade agreements, has come to nothing.
By all accounts, the US and Canada are no longer even talking. If the US cannot strike a new trade deal with Canada and Mexico, it is not going to reach an agreement with China.
How has China reacted?
For its part, the Chinese Government shows every sign of battening down the hatches for a protracted trade war. While it has been open to striking a deal with the US, the fractious nature of the US administration on trade policy has made even a superficial agreement illusive.
Since the beginning of the year, the nationalist faction in the White House has consolidated its position at the expense of those favouring a more liberal, negotiated approach.
Mr Trump did suggest that the Group of Seven nations should collectively drop all tariffs.
While some G7 members are also members of the European Union, which would prevent them from negotiating such a deal independently, this was perhaps the perfect moment for the G7 to call Mr Trump's bluff and revive the previously proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and EU.
But nobody took Mr Trump seriously.
At the recent meeting of the G7, the Trump administration would not even sign-on to a motherhood communique supporting a "rules-based international order".
According to one report, the administration is considering withdrawing from the World Trade Organisation. This would require the approval of Congress, which is already able to vote on WTO membership every five years.
Previous votes have overwhelmingly endorsed continued membership, but the domestic politics on this could change.
Congress hasn't restrained Trump
The Congress has failed to exercise its constitutional authority over trade to restrain these abuses of executive power by the President.
While a small number of Republican members have opposed Mr Trump on tariffs, many Democrat members have been cheering him on.
The US is also blocking appointments to the WTO Appellate Body that resolves international trade disputes.
If this continues, the WTO dispute settlement mechanism will soon collapse.
The economically correct response for other countries to US tariffs is not to respond in kind and continue with unilateral trade liberalisation, while litigating the US measures at the WTO.
But neither China nor the EU have shown willingness to exercise such restraint and US actions will be seen validating their own mercantilist instincts.
Domestic politics in the EU, China and elsewhere will demand retaliation rather than restraint or unilateral liberalisation.
Plenty to be pessimistic about
Given these developments, we have every reason to be pessimistic about the prospects for averting a 1930s-style trade war.
The most likely outcome is permanently higher tariffs, a reversal of the previous global trend towards lower tariff barriers.
Australian policymakers need to prepare for the worst.
Our best course of action is to maintain its support for free trade. This will be a tough message to sell to the electorate amid a global trade war.
But unless the Australian Government makes a robust case for free trade at home and abroad, it will find the domestic politics of international trade increasingly difficult to manage.