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Wealth & Economics > Trade wars?

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message 1: by Ian (new)

Ian Miller | 9501 comments Trump has now put big tariffs on steel and aluminium imports (although there may be exemptions for some) and now he has selected serious tariffs on a lot of Chinese imports. The question is, is this right, bearing in mind where it might go? A serious world-wide sequence of trade wars?

One of Trump's statements was that China has put significant tariffs on US cars so why not reciprocate. I am all for reciprocal approaches, so that seems fair. Trump is also claiming that China does not respect intellectual property, and that is true in many cases. But are tries the answer to that problem? Finally, Trump is complaining that the US has a massive balance of payments deficit, but is that China's (or any other country's) fault? The big corporations in the US have been busy shifting manufacturing offshore for decades, and siting their profits away in tax havens, so is that anyone's fault other than The US' itself? Any thoughts?


message 2: by Michel (new)

Michel Poulin Whether US tariffs on Chinese products are justified or not, the main problem is that such US tariffs will most probably attract retaliatory tariffs from the Chinese and start a major trade war. In trade wars, the little consumer hurts the most, not the big corporations. Trump's tariffs may just put the USA's economy into a tail spin.


message 3: by Ian (new)

Ian Miller | 9501 comments Michel, it is not only the little consumer, it is the small producer as well. I saw a news item this evening where some American farmers were pleading with Trump (on TV, not personally) not to do it because it would almost destroy the markets for their products (soy beans, I think). I am also associated with a small company trying to build up an export market for some seaweed-based skin-care products, and because China is a big producer of seaweeds, we are just as likely to get caught up in the cross-fire. The trouble with these sort of wars is the consequences are almost never isolated to the initial targets.


message 4: by Nik (new)

Nik Krasno | 13482 comments I think many countries are concerned with so much of production facilities concentrating in China. How to deal with it (if at all) is another question. Tariffs may bring back some of the manufacturing into the US.
My colleagues now look into the option of establishing a production of solar panels in the US, because of tariffs imposed on their import, while green energy is a booming industry.
The trade wars may also be viewed as a spin off of currency wars.
It's anti-globalization, however we can't be sure the desired results will necessarily prevail over side effects..


message 5: by Ian (new)

Ian Miller | 9501 comments One point is that assuming more manufacturing is done in the US, would that have happened anyway with increased use of robotics? If so, the US hurts its own exporters and gains little. In any case, the reason why so much manufacturing is done in China is that the multinationals have deliberately move their manufacturing there. If the idea is to bring that back to the US, given that most of the multis are US owned, was there a better way of doing it?


message 6: by Graeme (new)

Graeme Rodaughan | 7229 comments Tit for Tat, the Chinese are lining up Tariff retaliations.

REF: https://twitter.com/HuXijin_GT/status...

What's the saying, "An eye for an eye will make the whole world blind."


message 7: by Ian (new)

Ian Miller | 9501 comments And in the land of the blind, the one-eyed man is king!


message 8: by Nik (new)

Nik Krasno | 13482 comments I wonder what would happen, if Chinese decide that manufacturing facilities 'lose contact' with their headquarters one day... Surely, it's not a casus belli, but just a breach of some commercial agreements, right?


message 9: by Ian (new)

Ian Miller | 9501 comments Tyhere would be a lot of seriously annoyed head offices, but it won't happen because Chinese investment owns too much of the US


message 10: by Nik (new)

Nik Krasno | 13482 comments That's assuming that everything boils down to money in the end.. Might be true in peaceful times, but when there is a 'war' anything can happen...


message 11: by Graeme (new)

Graeme Rodaughan | 7229 comments War has to be paid for. Nothing happens without money.


message 12: by Ian (new)

Ian Miller | 9501 comments Nik wrote: "That's assuming that everything boils down to money in the end.. Might be true in peaceful times, but when there is a 'war' anything can happen..."

It is true each country could confiscate/nationalize the assets of the other, and the effects of that are unforeseeable. Basically, the rest of the world might have to pick sides and trade with only one, which they consider the most reliable (assuming it doesn't descend into a shooting war). It may be possible for some to remain "neutral" and trade with both, but might have to face big tariffs from both. This sort of thing would severely hurt small countries like New Zealand, which simply cannot make everything economically. They would end up being like Cuba up until a few years ago.


message 13: by Michel (new)

Michel Poulin Well, you can imagine what kind of delicate situation Canada is in now. Canada is by far the biggest trading partner of the USA but also is hoping to make more trade with China. The fact that Donald Trump already lied in the face of Prime Minister Trudeau about trade deficits and then bragged about it doesn't make things easier.


message 14: by Ian (new)

Ian Miller | 9501 comments Michel wrote: "Well, you can imagine what kind of delicate situation Canada is in now. Canada is by far the biggest trading partner of the USA but also is hoping to make more trade with China. The fact that Donal..."

Yes, I was wondering about that, and I would think the same applies to Mexico, although possibly to a slightly lesser extent. As I understand it, a lot of manufacturing in North America involves stuff going backwards and forwards across the Canadian US border under NAFTA, and it can't be good news to hear Trump say he wants to renegotiate that too. Trump's ideas seem to be that negotiation means, give him what he wants or else.

New Zealand is also in an awkward position because while the US is a big trading partner, China is actually bigger. On the other hand, we have an aluminium smelter that will probably go out of business if we get hit by the aluminium tariffs.


message 15: by Graeme (new)

Graeme Rodaughan | 7229 comments Ian. Australia's aluminum smelters are already out of business. At least in Victoria.


message 16: by Ian (new)

Ian Miller | 9501 comments Sorry to hear that Graeme. I gather there is a bit of a glut, so I guess that is not due to Trump.

There is another point about all this. Trump is correct on one point: China is both protectionist and it does not recognise other's IP. (Actually the US didn't either during the 19th century.) The EU is also very protectionist, and that raises the question, why shouldn't the US carry out reciprocal actions against them? If so, how should it do it? Trump's broad brush approach would not seem to be the best way.


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