# Are trade wars good? **URL:** \ **Category:** Great Debates\ **Created:** [March 2, 2018, 4:57pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902 "2018-03-02T16:57:48Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![Fuzzy\_wuzzy](https://avatars.discourse-cdn.com/v4/letter/f/a8b319/32.png) [@Fuzzy\_wuzzy](https://boards.straightdope.com/u/Fuzzy_wuzzy)\ **Post date:** [March 7, 2018, 12:03pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/81 "2018-03-07T12:03:44Z")
Assuming free trade is good; a trade war or tarrifs designed to punish anti-free trade practices are probably good if they encourage free-trade in the medium to long-term. Tarrifs designed to artificially protect domestic workers are probably bad. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 7, 2018, 3:17pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/82 "2018-03-07T15:17:18Z")
Hm…you know, maybe they ARE good. This one might just be the straw that breaks the Trump administrations back. This has been (yet another) clusterfuck for the administration, and I read today that Gary Cohn resigned over this directly, with a lot more in the White House unhappy over this whole mess. Investors are taking this as a sign that Trump is going to follow through with his ridiculous tariffs, and the DOW is reflecting that. The US is taking almost constant hits to our image, our soft power and even our real power, internationally. Trump has done more than any past president (I thought Bush II was the gold standard for this, but now I look back almost fondly compared to this idiot) to drag this country down, and he’s succeeded in doing real, lasting damage. If this latest self inflicted wound to the country actually manages to bring the man down, it will be worth it. ---
**Author:** ![CarnalK](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carnalk/32/486_2.png) [@CarnalK](https://boards.straightdope.com/u/CarnalK)\ **Post date:** [March 7, 2018, 3:23pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/83 "2018-03-07T15:23:53Z")
> [@Fuzzy\_wuzzy](#): > > Assuming free trade is good; a trade war or tarrifs designed to punish anti-free trade practices are probably good if they encourage free-trade in the medium to long-term. Tarrifs designed to artificially protect domestic workers are probably bad. But there are dispute settling mechanisms in place to deal with anti-free trade practices. Going rogue and starting a trade war still isn’t good. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [March 7, 2018, 3:45pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/84 "2018-03-07T15:45:34Z")
> [@penultima\_thule](#): > > Sure. > But if, as in your example, the target country is using abhorrent practices such as slavery then saying you are whacking them with a 10% tariff on steel & aluminium to benefit your domestic producers shows a certain lack of moral conviction to the greater cause. > > My thunking is that to apply an economic sanction then prohibiting exports from or supply of key raw materials to the target as say applied with Iraq and DPRNK would be a more appropriate punitive action, but YMMV. I was not saying that you would use tariffs exclusively, just that they are part of that tool chest of economic sanctions. For instance, China, they don’t exactly use slave labor, but their humanitarian record is a bit spotty, and they also don’t have very good environmental regulations. Putting tariffs on their goods to compensate for working conditions and environmental conditions that we would not allow can help to prevent them from profiting from those conditions, while still allowing them to have trade to build up trade in order to work their way into prosperity and better conditions. And that was my point, in the first place. Tariffs do not make any sense to do to protect domestic production, as even if it does boost the production of that commodity, it will cost the economy overall. They only make sense as part of economic sanctions to pressure other countries to reform. There are times when some domestic industries should be protected for national security. We do need the ability to produce our own steel and aluminum, in case other countries start trade wars (or military wars) with us and cut out foreign supply. But, I feel that if that is the case, such industries are better being subsidized, rather than “protected”, and they largely are through defense contracts that have to source materials from US suppliers. ---
**Author:** ![penultima\_thule](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/penultima_thule/32/3833_2.png) [@penultima\_thule](https://boards.straightdope.com/u/penultima_thule)\ **Post date:** [March 7, 2018, 9:31pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/85 "2018-03-07T21:31:14Z")
> [@k9bfriender](#): > > We do need the ability to produce our own steel and aluminum, in case other countries start trade wars (or military wars) with us and cut out foreign supply. There you go, and I thought that the Canucks where such friendly folk, and clever 'cause they can produce metal products in grades and price points the US can’t, and surely you can forgive them for that bit of youthful enthusiasm in 1812, its been over 200 years they’ve been pretty good neighbours and isn’t the US the ones starting this trade war? > [@](#): > > But, I feel is the case, such industries are better being subsidized, rather than “protected” You think that a subsidy isn’t industry protection of the same order and consequence as tariffs? Would you have a High school Economics 1.01 primer lying around you could read? ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [March 7, 2018, 10:03pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/86 "2018-03-07T22:03:57Z")
> [@penultima\_thule](#): > > There you go, and I thought that the Canucks where such friendly folk, and clever 'cause they can produce metal products in grades and price points the US can’t, and surely you can forgive them for that bit of youthful enthusiasm in 1812, its been over 200 years they’ve been pretty good neighbours and isn’t the US the ones starting this trade war? So? That doesn’t come close to addressing, much less refuting, what I said. > [@](#): > > You think that a subsidy isn’t industry protection of the same order and consequence as tariffs? Would you have a High school Economics 1.01 primer lying around you could read? What are you going on about? Your petty insults aside, a subsidy is not the same thing as a tariff. ---
**Author:** ![penultima\_thule](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/penultima_thule/32/3833_2.png) [@penultima\_thule](https://boards.straightdope.com/u/penultima_thule)\ **Post date:** [March 7, 2018, 10:43pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/87 "2018-03-07T22:43:28Z")
> [@](#): > > a subsidy is not the same thing as a tariff Different mechanisms in protectionism in that who collects the money, who gets levied and how the charge is calculated. But whether a 10% tariff is applied on imports or a 10% subsidy is applied to local production they have the same effect on the market from the consumers perspective. ---
**Author:** ![penultima\_thule](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/penultima_thule/32/3833_2.png) [@penultima\_thule](https://boards.straightdope.com/u/penultima_thule)\ **Post date:** [March 7, 2018, 11:26pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/88 "2018-03-07T23:26:21Z")
> [@k9bfriender](#): > > So? That doesn’t come close to addressing, much less refuting, what I said. You were advocating that the US is justified in starting a trade war with Canada over steel & aluminium products just in case Canada starts a trade war with the US over steel & aluminium products . Yeah, I got nuthin’. So I thought I’d give irony a burl. Didn’t work either. ---
**Author:** ![Horatius](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/horatius/32/3572_2.png) [@Horatius](https://boards.straightdope.com/u/Horatius)\ **Post date:** [March 7, 2018, 11:33pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/89 "2018-03-07T23:33:26Z")
> [@penultima\_thule](#): > > But whether a 10% tariff is applied on imports or a 10% subsidy is applied to local production they have the same effect on the market from the consumers perspective. How so? A tariff would directly cause a rise in the cost of the single good it is placed on, while the subsidy would lower the cost of national products to match the imports. If the subsidy is paid out of general tax revenue, the cost would be spread around the entire economy, it would not be focused on a single product. If the amounts of imported and domestic steel were the same, it would end up costing the same/similar amount of money overall, but that’s not the same thing as “the same effect on the market”. If domestic steel was a smaller fraction of the overall steel market, though, the overall costs would be lower (10% of 25%, vs. 10% of 75%, as an example). ---
**Author:** ![BigT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigt/32/12044_2.png) [@BigT](https://boards.straightdope.com/u/BigT)\ **Post date:** [March 7, 2018, 11:46pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/90 "2018-03-07T23:46:50Z")
> [@RickJay](#): > > As the old joke goes, the difference between a trade war and a real war is that in a trade war, your gun is pointed at your own feet. > > A country would actually be better off _not doing anything at all_. If in fact Trump goes ahead with this - and if I had to bet ten bucks on it I’d bet it won’t happen - raising a retaliatory tariff would simply hurt that country’s economy. The only theoretical benefit would be to punish the original tariff-raising country and create a sense in any would-be tariff-raises in the future that they can’t benefit from such behavior. That will not work here, though, because Trump is the President. If the President were Obama, or Bush, or Clinton, it may work, because they would consider the ramification of what they had done. Trump is weak, temperamental, and cannot learn new things, so not only would he not respond rationally, but the deterrent effect on other countries wouldn’t even matter because they know Trump isn’t a normal thing and that a response to Trump is not how one would respond to a normal head of state. The mistake in your assessment is assuming Trump is the one they are going after. What I saw people saying early on is that they are tariffs that would affect a bunch of red states. They’re going after Congress, to try to get them to handle it, up to actually removing Trump’s ability to impose tariffs at all. Remember, the President only has this power because Congress willed it. And while I can see being afraid that Trump would hold a grudge, it’s not going to hurt them with their constituents. And they have to know their grasp on the presidency is weak. The only real threat is Trump refusing to sign any more bills out of spite. But then all you’d need to do is have him talk to someone who thought that was a bad idea, and he’d agree with them. ---
**Author:** ![pdhenry](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pdhenry/32/5561_2.png) [@pdhenry](https://boards.straightdope.com/u/pdhenry)\ **Post date:** [March 8, 2018, 4:29pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/91 "2018-03-08T16:29:08Z")
> [@senoy](#): > > 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? Or, since the managed economy of China might be less focused on short-term profits than the US, China cuts their price further so the post-tariff price is 9 dollars. I understand that part of the problem is that Chinese has excess capacity for steel production and imposition of a US tariff doesn’t do a thing to their capacity, particularly in the short term. Reducing the price of Chinese steel still undercuts the US source price at home and abroad, damaging any residual foreign market for US steel as part of the process. So it depends in part on China’s response to the tariff and their level of patience. Sort of like [Amazon.com](http://Amazon.com) on a national level. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [March 8, 2018, 5:26pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/92 "2018-03-08T17:26:12Z")
> [@penultima\_thule](#): > > Different mechanisms in protectionism in that who collects the money, who gets levied and how the charge is calculated. > But whether a 10% tariff is applied on imports or a 10% subsidy is applied to local production they have the same effect on the market from the consumers perspective. The only similarity is that they are a fiscal policy enacted by the govt. In every other way, they are completely different. In a tariff, imports are taxed, which moves money from the consumer to the govt, and increases demand for local production by increasing the cost of foreign. In a subsidy, money moves from the govt to the industry, lowering the cost of the item, and increases demand for local production by having a lower cost. Do you get that at all? A tariff increases the cost to the consumer, while a subsidy decreases the cost to the consumer? > [@penultima\_thule](#): > > You were advocating that the US is justified in starting a trade war with Canada over steel & aluminium products just in case Canada starts a trade war with the US over steel & aluminium products . Ummm, no, I was not, not at all. Please try re-reading what I posted, as it is clear that you didn’t understand any of it if that is the accusation that you are making. > [@](#): > > Yeah, I got nuthin’. > So I thought I’d give irony a burl. > Didn’t work either. You are making even less sense here. ---
**Author:** ![penultima\_thule](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/penultima_thule/32/3833_2.png) [@penultima\_thule](https://boards.straightdope.com/u/penultima_thule)\ **Post date:** [March 8, 2018, 10:33pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/93 "2018-03-08T22:33:31Z")
> [@k9bfriender](#): > > Do you get that at all? A tariff increases the cost to the consumer, while a subsidy decreases the cost to the consumer? QED. Sure, that’s the tag line and consequent populism. But if subsidies lower consumer prices, you need to ask just one question: where’s the money coming from? Because somewhat akin to Newton’s 3rd Law, every action has an equal & opposite reaction, though in economics there’s no restriction on over-reaction. Take a stylised, isolated example. US flat product steel is being beaten in the market by Canadian flat product steel. The US steel industry lobbies the Congress for market support. A 25% tariff is applied to all imports of Canadian flat product steel. Who pays the tariff? Certainly not the Canadian producers. The 25% is assessed on the USD FOB value of the imported product, is paid by the US importer to the US Customs collections agency. The US importer passes the cost on to their US customers. US Internal Revenue can do with the revenue whatever what the Government requires but let’s close the circle and suppose that the value of the tariffs collected is paid as price support to US producers on an appropriate volumetric basis. Who pays for this price support US producers? Either the US consumers of flat product steel or the customers of these consumers, in reality both. So you have kicked off a trade war and US consumers of flat product steel are funding both sides. I seen this in action quantitatively through 4 decades of working in import/export and trading businesses. But I learnt it in an Economics 1.01 primer. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [March 8, 2018, 10:56pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/94 "2018-03-08T22:56:12Z")
To start with, I never advocated for any sort of trade war, I instead said a trade war was stupid. I did bring up that, in the hypothetical situation where you have an industry that is necessary for national security, it is better to protect it with subsides than with tariffs. But, I did say, “if”, not that we should. Secondly, the example you just used, you brought up tariffs, which, even in the hypothetical where it is an industry that is worth protecting, would not be used, only subsidies, which are paid for by the taxpayer, not the consumer. I have no idea what you are trying to argue about here, but you are doing a very poor job of responding to anything I have actually said. With that in mind, please rethink your posting. Thank you. ---
**Author:** ![WillReadmore](https://avatars.discourse-cdn.com/v4/letter/w/6f9a4e/32.png) [@WillReadmore](https://boards.straightdope.com/u/WillReadmore)\ **Post date:** [March 8, 2018, 10:59pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/95 "2018-03-08T22:59:14Z")
> [@Sage\_Rat](#): > > Yeah, if I’m honest, I don’t really see what motive Trump had to do this. If we imported steel from China, I could see it, but they aren’t even in the top 10 and even within the top 10 [we don’t strongly favor one country over another](https://www.trade.gov/steel/countries/pdfs/imports-us.pdf) (PDF). It’s unclear who, exactly, this is meant to target. > > With his “let’s snatch the guns!” and now this, I feel like he’s going into meltdown mode again. (People forget how much worse Trump was before John Kelly took over babysitting duty.) At best, maaaaybe this is a reaction to the Mexican President refusing to pay for the wall? But I think we can call this the “my daughter’s husband is going to jail and I lost my sugarbaby” trade war. Amen. His claim of national security importance was another totally unsupportable bit of garbage. We get our steel from strong allies. And, raising the cost of steel through tariffs means making national security more expensive. Or, does he think that aircraft carriers are somehow aware of where the ore was smelted? ---
**Author:** ![Johnny\_Ace](https://avatars.discourse-cdn.com/v4/letter/j/6bbea6/32.png) [@Johnny\_Ace](https://boards.straightdope.com/u/Johnny_Ace)\ **Post date:** [March 8, 2018, 11:39pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/96 "2018-03-08T23:39:37Z")
> [@WillReadmore](#): > > Amen. > > His claim of national security importance was another totally unsupportable bit of garbage. > > We get our steel from strong allies. And, raising the cost of steel through tariffs means making national security more expensive. > > Or, does he think that aircraft carriers are somehow aware of where the ore was smelted? Defense contractors are aware. So is the DoD. ---
**Author:** ![WillReadmore](https://avatars.discourse-cdn.com/v4/letter/w/6f9a4e/32.png) [@WillReadmore](https://boards.straightdope.com/u/WillReadmore)\ **Post date:** [March 9, 2018, 12:17am UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/97 "2018-03-09T00:17:57Z")
> [@Johnny\_Ace](#): > > Defense contractors are aware. So is the DoD. I think everybody is aware. So, I’m not sure where you’re headed with this post. ---
**Author:** ![Horatius](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/horatius/32/3572_2.png) [@Horatius](https://boards.straightdope.com/u/Horatius)\ **Post date:** [March 9, 2018, 3:35pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/98 "2018-03-09T15:35:06Z")
> [@WillReadmore](#): > > Amen. > > His claim of national security importance was another totally unsupportable bit of garbage. > > We get our steel from strong allies. You’re just not playing that “3-dimensional chess” we keep hearing about from the Trumpeteers. They way he’s been smack-talking Canada and Mexico, we might not be “strong allies” for much longer, then BAM! National security problem, baby! 😃 ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [March 9, 2018, 3:51pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/99 "2018-03-09T15:51:08Z")
Dumping, as a strategy, can only work if the industry you are suppressing can’t rebound - so the dumper can later jack up the price and enjoy their monopoly. If the industry _can_ rebound, it’s economically pointless as a tactic - you are just giving money to the foreign consumers. Of course, it may have other purposes (like acting as a subsidy, direct or indirect, to some group of domestic importance to the dumper). But as a tool of trade war, it rarely makes any sense: you are subsidizing other nations as well. As my old law and economics prof liked to quip: - If you sell for **less** than your competitors in other nations, you must be ‘dumping’; - If you sell for **more** than your competitors in other nations, you must be ‘abusing a functional monopoly’; - If you sell for **exactly the same** as your competitors in other nations, you must be ‘in collusion with them’. 😉 ---
**Author:** ![DesertDog](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/desertdog/32/11503_2.png) [@DesertDog](https://boards.straightdope.com/u/DesertDog)\ **Post date:** [March 9, 2018, 3:54pm UTC](https://boards.straightdope.com/t/are-trade-wars-good/809902/100 "2018-03-09T15:54:48Z")
> [@asahi](#): > > It’s as if Trump’s economic policies come out of the year 1978, or more like 1968 to be more accurate. More like 1930. I am recalling the [Smoot-Hawley](https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act) tariff act, the one that made the Great Depression even worse. [Previous page](https://boards.straightdope.com/t/are-trade-wars-good/809902.md?page=4) [Next page](https://boards.straightdope.com/t/are-trade-wars-good/809902.md?page=6)