As much as some people here may hate Trump, the fact is that he was right when we said that it is difficult for us to lose a trade war with China since we import more from them than we export. Is there going to be some short term pain? Absolutely! But, long term it is likely to create more jobs in the US. As an extra bonus, there won't be as much of a carbon footprint for shipping things half way around the world and we might begin to focus on quality instead of quantity which what we consume if the labor is now a larger part of the price...
There are a few scenarios. One would be Chinese companies are forced to get more efficient to survive. This makes them even more competitive and they can force out American companies in other contested regions.
Another is the inflation caused by the tariffs reducing the profits of industries that compete for the same consumer dollars. If consumers are paying more for plastic goods, then they have less money to spend on discretionary purchases.
Production moving from China to the US puts strain an already tight labor market, which displaces incumbent industries. I.e., shoe manufactures move to the US to avoid tariffs, which makes labor too expensive for the cardboard industry, who moves to another region.
All of these effects cascade to related industries.
Also, the collective "we" can win even if a large number of us suffer as a result of these policies.
Trade is usually 'win win'. So when there's less trade, there's less 'winning' on both sides.
Imagine if Chia is the sole source of Silk, and the US is the sole source of Rubber.
If the US 'wins' a trade war with China by doing more damage to then, but there is less trade ... well then there is unmet/latent demand in the US for Silk and in China for Rubber that is not met, which is an economic loss.
That said - trade needs to be in fair terms or it doesn't work. If one side cheats, they can suck all of the 'win' out of the 'win win' for themselves.
This seems like a good deal to me. The US sends China paper with funny pictures printed on it, and gets back real goods. And as far as I can see, they have the ability to print infinite amounts of the funny paper.
Running a trade deficit doesn't inherently mean you are losing utility from the trade. Your trade deficit with Walmart (or Costco, or whatever) is negative but both of you gained from the trade. China cheats, and there is no doubt in that; but I am not convinced that US's trade deficit is purely or even mostly a result of that.
Trade doesn't really work like that. If I say buy a car off you it doesn't mean you've won and I've lost, just that we've done an exchange. If the government bans or taxes the exchange it probably just makes us worse off. Similarly with China trade there wasn't much of a problem till the stable genius decided to get worked up about things and it will probably cause both sides losses.
I don't see how you can claim there were no problems with trade before the tariffs, China outright bans far more American companies and classes of imports than the reverse.
TBH, I don't see why that's necessarily a problem.
Different countries have different laws, and they all forbid importing some stuff. China is stricter than us, so it stands to reason that we'll produce more products forbidden in their country than the other way around.
There's not much to support this rosy outlook yet. We were already at 'full employment.' Wages are just inline with inflation as they were before and we have farmers feeling the pain of the trade war.
We can certainly hurt China but that was never in question. Whether this scheme will be any good for the US is TBD.
How so? As it is the only people who's standard of living has been rising in the past 30 years has been those at the top while the middle class etc. continue to lose ground.
That is true in the US, but worldwide, the drop in poverty has been immense over the past few decades. In 1966, half of the world lived in extreme poverty. As of 2017, that number is now 9%. 9%!
This does not remove the real problems we have in the states regarding wealth distribution. But globally, things are pretty amazing compared to how they've been, even within a single lifetime.
What that means is a trade war is going to cause prices in the US to rise more than prices in China. Which means either the prices of what the US does export will go up or the USA's standard of living will go down.
In the short term a carefully crafted trade barrier can have positive effects. For example, if the government decides a country should have natural advantage in industry X, but establishing industry X is impossible because of foreign competition than a trade barrier is a reasonable option. In effect the rest of the population is subsidising the initial higher prices and poor quality from industry X until experience and effects of scale kick in.
The danger is a trade barrier can be damned hard to get rid of because inevitably doing so will kill jobs. So hard that killing them it usually requires some sort of crisis. That's what happened in both Australia and NZ a few decades ago, with one Australia treasurer famously saying "if we don't do something we will become a banana republic". The barriers came down, there was an enormous amount of pain (interest rates hitting 20%), and he got voted out. But the country hasn't had a recession since.
If Trump's little war disappears with Trump I doubt it will have much effect on anything. If I was a US citizen, the most worrying line in that article is some democrats support it, so they could stay.
His trade war with China (and only China) is one of the few administration's positions I whole wholeheartedly support (as a economics dilettante, no expert).
Our "trade war" with Canada is a proxy trade war with China. Our "trade war" with Europe is, to a much more limited degree, a proxy trade war with China.
A big part of the rationale with all of these little trade wars is to make China stand alone on the global stage, so that they are more easily negotiated with. A secondary effect is to eliminate "Made in $country" goods that are 90% manufactured in China and finished in e.g. Italy or Canada.
That doesn't make much sense at all. Ruining goodwill and relationships (and of course trade) with YOUR MOST IMPORTANT ALLIES is certainly not just proxy economic warfare. The EU economy as a whole is bigger than either China or the US.
Don't try to find a logic when there clearly is none. Trade war with EU and Canada might be the most unhelpful thing Trump has done.
>Ruining goodwill and relationships (and of course trade) with YOUR MOST IMPORTANT ALLIES
That's not how this works. A trade tariff dispute doesn't mean anything about the relationships in other matters unless they are brought up as part of the negotiations. Each country isn't a single person being directed by their feelings being hurt.
So we can certainly negotiate with Canada to get them to lift dairy tariffs or whatever and still count on them not to allow Russia to setup air force bases there.
>Umm, sorry for being flippant, but are we reading the same news about US foreign policy last 18 months...? :-/
Not sure. I don't recall any news about the US going to war or halting trade with any of its previous allies. I don't remember reading anything about the five eyes agreements changing. Do you have other news sources?
The phrase being used is "ruining relationships". Maybe you have a different definition of "ruined" if you think Trump has ruined any relationships with allies.
That is something to consider. Interesting. But anyone in the know knows that it is about China. And so, it is about saving face with the general public, not the technocrats.
Yes, but what’s the actual strategy? According to Woodward’s book, Trump’s true opinion is that “Trade is bad.” These tarrifs aren’t negotiating chips — something unpalatable to get what he wants. They’re what he wants.
> we might begin to focus on quality instead of quantity which what we consume if the labor is now a larger part of the price...
I'm hoping the same. I don't think it's likely to happen, but it would be good long term. Short term though, it will be a bit of a shock to see the plastic toy that was $20 now be $100.
