Much international trade is now in “intermediate” goods, rather than finished or raw materials. This globalisation of the value chain makes trade wars far more costly than they were. You know, we should do less of more expensive things? Thus we should have fewer trade wars?
Trade wars in the global value chain era
Emily Blanchard 20 June 2019
The nature of global commerce has changed dramatically over the past 40 years, with the meteoric rise of global value chain trade.…
See MoreReports are that China is considering using its “rare earth weapon” in the trade war with the United States. This weapon is in fact rather less of a terror than either they or we think. If they actually use it the end result will be – after a bit of chaos and disruption – that China no longer has the rare earth weapon.
After all, that is what did happen last time they tried this and yes, history does repeat itself just like a bad burger and onions.…
See MoreEconomics is, as yet, an imperfect science. My own estimation is that in macroeconomics at least we’re at about the stage chemistry was when they still believed in phlogiston. But matters do progress – trade wars and trade tariffs are even worse than we thought they were:
The effects of trade policy might be more diverse than most economists think
Peter Egger, Katharina Erhardt 03 May 2019
When economists model changes in tariffs, their models make assumptions about the impact of those changes.…
See MoreAs we all know every economist on the planet has been shouting that we don’t want to have a trade war. The reason being that such trade wars just make everyone poorer. Making people poorer not being known as a useful goal of economic policy. Of course, what does Donald Trump, egged on by Peter Navarro, actually go and do? Have a trade war.
The result is obvious, people become poorer:
… See More“Harley Davidson has struggled with Tariffs with the EU, currently paying 31%.
The idea that tariffs don’t hurt the importing country is entirely bizarre. Everyone in that country now has to pay more for whatever it is. Of course that’s damage, everyone’s poorer by the amount of that rise in price. This paper is arguing something a little different, that the productive industry of the country is harmed by the imposition of those tariffs. That is, this is just another way that trade wars make us poorer:
Trade wars and global value chains: Shooting oneself in the foot
Cecilia Bellora, Lionel Fontagné 22 April 2019
Since 2018, the US administration has implemented several measures limiting free trade with China and other countries.…
See MoreOf course we’re all aware that this very idea of a trade war is ludicrous. Each government is promising, with ever greater vehemence, to shoot their own population in the foot even more. For the people who pay tariffs are the people sheltered behind them. Canadians pay tariffs imposed by the Canadian government.
Now, even given all of that there are still even more stupid ways of conducting such impoverishing policy.
… See MoreWhen Sen. Patrick Toomey looks at the future of the ketchup market in his home state of Pennsylvania, he sees real blood on the floor.
There are worrying things about the trade spats between Donald Trump and China. But the threat of Chinese tariffs upon US oil exports (or imports of US oil into China at least) aren’t such. Sure, the general idea of a trade war is an exercise in seeing who can impoverish their own populations first and fastest but we all know that anyway. Imposing tariffs upon crude oil though, that’s going to mean pretty much no difference to anything at all.…
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