This article by Eduardo Porter tries to explain the possible reasoning behind and consequences of the President’s proposed tariff increase on Chinese imports into the United States. President Trump has promised to increase tariffs on Chinese imports to a whopping 45%. This not only upsets market equilibrium, but makes a potential enemy out of the world’s second-largest economy. This will result in potentially destructive outcomes for both the world’s economy and security. The so-called “rise” of China has been predictably peaceful, and many political scientists and economists find comfort in the deep economic interdependence between the United States and China as a preventative measure against actual war. However, The author cites acclaimed political scientist John Mearsheimer who argues that the increase in tariffs, in addition to other provocative actions and policies is actually raising “...the risk of an actual shooting war…” (Porter). Aside from the probable economic punishments, the consequences of a potentially nuclear war with China would be catastrophic, and Eduardo Porter suggests that the United States is inching closer and closer. The article goes on to cite the renegotiation of NAFTA, WTO agreements, and the new immigrant ban as examples of the President altering alliances and agreements that have been in place since the end of WWII. At the end of the day, President Trump is threatening to undermine economic and political rules of the game, both formal and informal. Who knows what the fallout will be?
Eduardo Porter goes on to explain that President Trump sees economic relations as a “zero-sum competition” in which exporters win over importers and mutually beneficial policies do not exist. Douglas Irwin, a trade historian at Dartmouth College, notes that “The trade deficit is the number that determines for him who wins and loses” (Porter). However, the author explains that the President’s macroeconomic strategy revolves around increased government spending combined with high interest rates is, in fact, going to strengthen the dollar and is therefore in opposition to his new trade policies. One thing is for sure, President Trump is not acting with traditional rationality when it comes to economic policy or foreign relations.
5 comments:
It seems as though many of Trump's trade policies ignore the fact of globalization. It's not necessarily that President Trump's goals are so out of line, I mean who doesn't want more American jobs, its just that his solutions are oversimplified and ignore the economic and political international climate. Like this article states, we can't just slap a massive tariff on China and expect that it will be successful and cause no negative ramifications.
I find the point about Trump seeing economic relations as a zero sum game extremely interesting. The idea that only one country or party can benefit from an economic interaction and the other fails is an idea that has been replaced by the idea of global cooperation. Trump is fighting a force that is more powerful than he will ever be, globalization, and these next four years the world will witness his fight.
My dad has a friend who has a company specializing in foreign trade. Some of their products are exported to America. My dad told me when they talked about the tariff increasing problem, he just said if Trump increases the tariffs by 45%, they will just increase the price by 45%. Because the production cost in China is so low that even if they increase the price which will still be lower than American domestic products. Also, he said America is not the only country that they can sell their products. They can choose to export to other countries of just sell in Chiese domestic market which is also large and has large market potential. Personally, I would expect that China can take this as a chance to adjust its economic and production structure.
Thats an interesting comment, Dianyi. It seems like it will just hurt American consumers and companies more than Trump realizes. Because if prices are so low in China, then we will likely buy many of the products from China still but just it will be more costly but we do not have a better alternative. It also is scary from the standpoint of foreign policy because individual countries are only as strong as the allies they have and no country is strong enough to act independently against a collection of other strong nations.
Emily brings up an interesting point about the zero sum strategy Trump or "President Bannon" depending on who's really in charge, Trump's business tactics have landed him in trouble with a couple of filed bankruptcies in his career. Using that model when the US economy is on the line affects millions of people's lives and a more balanced trade agreement needs to be agreed upon. He can't act selfish and believe trade deals are only a one way street, nobody would take it and as a result there would be little trade partners to do business with.
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