Realist, not conformist analysis of the latest financial, business and political news

The IMF’s Warning About Trade Tariffs and Trade Wars

Actually, the International Monetary Fund is arguing that the major worry we’ve all got in this global economy of ours is the silliness with which certain people are approaching that subject of trade.

The basic background to the trade story is:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Tariffs Are A Bad Idea Anyway.
The entire aim of having trade is so that we can go buy those lovely things made by foreigners. We only export so as to be able to swap something for those foreign made goods. Thus tariffs are a bad idea to begin with – why should we tax ourselves for gaining access to the very point of our having trade in the first place? Sadly all too many don’t grasp this point. Too many of them being in the current Trump Administration.[/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Over and above the general point that we don’t want to limit trade nor imports there’s another worry with tariffs and trade wars. Which is what the International Monetary Fund is complaining about. The imposition of more tariffs is a disruption to that global economy. One that is going to reduce growth, the very thing we all desire.[/perfectpullquote]

And as the IMF is pointing out:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]US-China trade tensions have negatively affected consumers as well as many producers in both countries. The tariffs have reduced trade between the US and China, but the bilateral trade deficit remains broadly unchanged. While the impact on global growth is relatively modest at this time, the latest escalation could significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019.[/perfectpullquote]

Basically, allowing Peter Navarro anywhere near the levers of power was a very bad idea. But then we all knew that already, right?

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Matt Ryan
Matt Ryan
5 years ago

Is the second order effect of putting the Chinese back in their box not worth it?

Chances are we’d be better off in the common market but we chose to be worse off economically for a second order effect (our own democracy).

Quentin Vole
Quentin Vole
5 years ago
Reply to  Matt Ryan

Chances are we’d be better off in the common market

I’d rather say that there will be a short-term cost associated with our leaving, just as there is with almost any change. Long term the effect is likely to be beneficial. And we’ll also get our democracy back.

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