Trump’s declaration that “trade wars are good, and easy to win” is as foolish as it sounds.
But here’s the thing: Trump’s tariffs are badly designed even from the point of view of someone who shares his crude mercantilist view of trade. In fact, the structure of his tariffs so far is designed to inflict maximum damage on the U.S. economy, for minimal gain. Foreign retaliation, by contrast, is far more sophisticated: unlike Trump, the Chinese and other targets of his trade wrath seem to have a clear idea of what they’re trying to accomplish.
Both you and Trump believe that trade is a game in which he who runs the biggest surplus wins, and that America, which imports more than it exports, therefore has the upper hand in any conflict. That’s actually not how trade works. Trump's fixation on trade balances, imagines that the world still looks the way it did in the 1960s, when trade was overwhelmingly in final goods like wheat and cars. In that world, putting a tariff on imported cars would cause consumers to switch to domestic cars, adding auto industry jobs. In the modern world economy, however, a large part of trade is in intermediate goods – not cars but car parts. Put a tariff on car parts, and even the first-round effect on jobs is uncertain: maybe domestic parts producers will add workers, but you’ve raised costs and reduced competitiveness for downstream producers, like Ford and GM, who will shrink their operations.
China’s retaliation is mostly on final goods. And it’s also driven by a clear political strategy of hurting Trump voters; the Chinese, unlike Cult45, know what they’re trying to accomplish.
Now, if you wanted free trade, you and Trump should have been supporters of the Trans-Pacific Partnership (TPP.)
Oh, and the idea that Trump wants trade to be freer, so he is imposing tariffs, makes as much sense as his “trade wars are good, and easy to win” statement.
Also see:
China is winning the trade war with America for now
