Category Archives: Trade Wars

Is A Trade War Coming?

Published / by Stephen

Share This:

Paul Krugman, one of the smartest people on the planet when in comes to international trade, just posted his thoughts about Trump and trade wars, The art of the Flail. It is worth a read. Below are some exerts just to get your attention:

So is a trade war coming? Nobody knows — even, or perhaps especially, Trump himself. For while trade is one of Trump’s two signature issues — animus toward dark-skinned people being the other — when it comes to making actual demands on other countries, the tweeter in chief and his aides either don’t know what they want or they want things that our trading partners can’t deliver. Not won’t — can’t.

…Let’s talk in particular about the will-he-or-won’t-he confrontation with China.

In some ways, China really is a bad actor in the global economy. In particular, it has pretty much thumbed its nose at international rules on intellectual property rights, grabbing foreign technology without proper payment. And to be fair, Trump officials do sometimes raise the intellectual property issue as a justification for getting tough.

But if getting China to pay what it owes for technology were the goal, you’d expect the U.S. both to make specific demands on that front and to adopt a strategy aimed at inducing China to meet those demands.

In fact, the U.S. has given little indication of what China should do about intellectual property. Meanwhile, if getting better protection of patent rights and so on were the goal, America should be trying to build a coalition with other advanced countries to pressure the Chinese; instead, we’ve been alienating everyone in sight.

More on Trump & Trade-Wars by Krugman

Trump Facts & Tarriffs

Published / by Stephen

Share This:

First some selected Krugman’ quotes on trump facts and tarrifs, A Ranting Old Guy With Nukes:

1.  Regarding being “factually challenged:”

…you can’t help noticing that his opinions seem a bit, well, factually challenged. No, we aren’t experiencing a huge wave of violent crime carried out by immigrants. No, we don’t give away vast sums in foreign aid. And so on down the list. Basically, what he imagines to be facts are things he thinks he heard somewhere, maybe on Fox News, and can’t be bothered to check.

2.  Regarding tariffs on steel and aluminum, Trumps justification is “national security.”

After all, we can’t be dependent for our aluminum on unstable, hostile foreign powers like … Canada, our principal foreign supplier. (Canada is also our biggest foreign supplier of steel.)

Meanwhile, in the days since Trump’s announcement, he’s tweeted out one falsehood after another. And I don’t mean that he’s been saying things I disagree with; I mean that he’s been saying things that are simply, flatly wrong, even according to the U.S. government itself.

He has, for example, declared that we have large trade deficitswith Canada; actually, according to U.S. numbers, we run a small surplus.

The best argument I have heard against the steel & aluminum tariffs is the following:

  1. Steel and aluminum are not consumer products. They are used in the production of goods — for example beer kegs and automobiles.
  2. Imposing the tariffs raise the production cost of steel and aluminum goods.
  3. The tarrifs may have a minor positive effect on US employment in steel and aluminum production but they will make US steel and aluminum products less competitive.
  4. The result — reduced balance of trade and increased cost of US goods.
  5. If the tariffs result in a trade war things just get worse.

Does this sound like winning? So much for the the wonders of tariffs to increase US production. Hell of an idea Mr. Trump!

 

Trade-Wars Trump

Published / by Stephen

Share This:

According to Krugman:

“Donald Trump is belligerently ignorant about economics (and many other things). But up to this point that hasn’t mattered much. …

But there was always reason to be concerned about the possibility of crisis — either a crisis created by outside forces, like some kind of financial collapse, or one created by the administration itself. In that case the Fed’s rationality wouldn’t be enough. And it’s starting to look like we have a trade policy crisis on our hands.

“Trump has always had a thing about trade, which he sees the way he sees everything: as a test of power and masculinity. It’s all about who sells more: if we run a trade surplus we win, if we run a trade deficit, we lose”

This is, of course, nonsense. Trade isn’t a zero-sum game: it raises the productivity and wealth of the world economy. To take a not at all random example, it makes a lot of sense to produce aluminum, a process that uses vast amounts of electricity, in countries like Canada, which have abundant hydropower. So the U.S. gains from importing Canadian aluminum, whether or not we run a trade deficit with Canada. (As it happens, we don’t, but that’s pretty much beside the point.) …

So we can’t “win” a trade war. What we can do is start a cycle of tit-for-tat, and when it comes to trade, America — which accounts for 9 percent of world exports and 14 percent of world imports — is by no means a dominant superpower.

A cycle of retaliation would shrink overall world trade, making the world as a whole, America very much included, poorer. Read On.