Donald Trump, in defending his proposed tariffs on steel and aluminum, sent the above message to his Twitter followers. I suspect that he hasn’t really thought this through carefully. Is it possible, even “easy”, to win a trade war, or does it always just harm all players? Can we win this one?
Depends. Does anyone LIKE paying more for the stuff they buy?
If I understand it correctly, it will be good for American steel and aluminum workers in the short term, bad for everyone else in the short term, and bad for everyone (including American steel workers) in the long term.
I have to say that it’s gratifying to see America finally turn its attention to our true enemy, Canadian steel workers.
It depends if you know someone that can illegally give you inside information before it starts.
It’s economic illiteracy. You don’t “lose money” on trade. You trade it for things you value more than the money.
Baltimore Gas and Electric is killing me on trade, I’ll cut myself off from them and rub two sticks together.
Nobody wins in a trade war. The only way to win is not to play.
How about a nice game of chess?
As long as it’s not with this set.
Reducing demand for Chinese steel will reasonably result in lower demand from China for coking coal, which it imports from the USA. Expect more coal mining jobs to go away.
One side can get a better deal with the threat of a trade war.
Trade wars (depending upon how we define trade war) can certainly be ‘won.’ After all, that’s essentially what sanctions are and sometimes sanctions work. A lot of it depends on what you mean by ‘won’ and what you mean by ‘lost.’ If you have a legitimate goal and want to pressure another state into making a certain decision, warring via trade can be a legitimate option. If you mean can you improve your economy via tariffs, I would say that that too is possible. A lot of that depends on what you have that makes you so valuable. In this case though, I think a trade war with China needed to be fought 30 years ago if they wanted it to be successful. Now, the cat’s kind of out of the bag. We need China as much or more than they need us. At the same time though, Trump’s point is that they don’t really have any leverage via tariffs. And that’s true to an extent, About 8% of US exports go to China, not negligible, but it’s something we could deal with. About 20% of Chinese exports come here. They definitely have a lot more to lose in a trade war from the business perspective. From the consumer perspective though… well, let’s just say a full blown trade war with China would make things extremely difficult for you and me. We no longer have the capability of manufacturing many of the things we import. And I’m not just saying that the factories don’t exist now, but they will in the near future, I’m talking about supply chains that have completely disappeared and who knows how long it would take to recreate them. It could send inflation through the roof and some types of goods we just wouldn’t be able to get again for years and years if not decades. I think the big winners in a trade war between the US and China would be other Asian countries especially Vietnam and South Korea. They already have infrastructure in place and could ramp up production to help meet the falling output from China.
If a trading partner is dumping materials on you (“dumping” here has a specific economic meaning) then it may be worth starting a trade war over it…maybe. The issue is the dumping goes on till the competing industry in the target country goes out of business. Once that happens and you are the only game left in town you can raise prices.
That said I do not know if these metals are being dumped in the US.
It’s a bad idea to anyone who knows even the rudiments of international trade…which, sadly, doesn’t include Trump’s populist base nor, seemingly, many ‘conservatives’ in the Republican party. This is the kind of stupid horseshit I would have expected from the Democrats in times past, but I never would have thought would happen under a Republican president. Of course, Trump has so hijacked the Republicans that they are completely off the rails.
Every day since that idiot was elected is an adventure in wtf. I honestly don’t know where the country will be or if we can salvage anything from this mess once we are finally rid of the man. I often scoffed in the past when folks would say stuff like this, but Trump has made me a believer…a single president could actually wreck this country beyond repair. Hell, he’s almost got us there and he isn’t even half way through his first term yet. 
The guy selling it to you does.
But that’s why tariffs are stupid. Consumers pay more, domestic industries have no incentive to reduce prices or modernize, and the subject of the tariffs sells to someone else. Free trade is nearly always a better deal for most people. Which is one of the concepts on which there is broad consensus among economists, and broad disagreement among the economically illiterate. Including but not limited to elected officials.
There is actually a discussion of this in (of all places) A Connecticut Yankee in King Arthur’s Court by Twain. One would have thought it would sink in by now.
Regards,
Shodan
Samuel Clemens was widely acknowledged as a pacifist progressive*. It’s not like anyone in the administration would have ever listened to him.
*Albeit in a particularly outdated fashion not recognized in current politics.
Let me guess; you think you and Trump are on the same side.
There is no way we “win” this one, and the odds are just slightly north of 50% that he actually follows through with a trade war.
George W Bush did essentially the same thing in 2003/4 as part of an election-year gimmick to win PA and OH voters and the EU called his bluff a year later. If Trump goes through with this over the objection of his advisors and the Repubs in congress who still support trade (and who have a spine left in place), then I guess it might be psychiatric exam and 25th Amendment time. I mean, Obama left him an economy that basically runs like a brand new corvette. A trade war would be analogous to wrapping it around a tree.
Is the idea that US steel and aluminum producers will be able to sell less expensively than the Chinese?
Yes. If you’re an American manufacturer, pretend you have to sell a pound of steel for say 10 dollars to make a profit. A manufacturer from China can make that same profit selling their steel for 8 dollars. People will want to buy from the Chinese manufacturer. A tariff of 3 dollars per pound would make it so that the Chinese manufacturer would have to sell their steel for 11 dollars to make their profit and people will then buy from the American manufacturer. You can already see though the problem inherent in the system. The person buying the steel is an American consumer, so last week, you could buy your steel for 8 bucks, but this week you’re buying it for 10. Some of that can be mitigated though by the tariff money. If you set the tariff at the right level, the government will actually be collecting money from the sale of Chinese steel. They can then put this into tax cuts for consumers or redistribute it via other avenues (like hiring low skilled workers for make-work projects.)
What happens in a true trade war and the danger of a trade war is that China says, “Hey, you’re taxing our steel, so we’re going to tax your beef exports.” We may then say, “OK, it’s now steel and electronics” and you can end up in a major tit-for-tat ‘war’ where the cost of all consumer goods escalates while the gains you get from taxing their exports is balanced by the loss of your exports to them. So basically, your consumers pay more, but there really isn’t a net economic growth. Trump’s logic is that they export way more to us than we do to them, so if it came to all out war, it would be more favorable to our industries, and if industries were completely frictionless and only two countries in the world existed, that might be true. The problem is that industries aren’t frictionless. If I make it hard to import a shirt for example, the infrastructure and supply chain doesn’t exist in the US to just open a shirt factory tomorrow and getting to the second point, what compels me to open it in the US when I could just open it in Bangladesh instead and still enjoy cheap labor, but avoid the tariffs?