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RE: There Are Only LOSERS In A Trade War

in #trade6 years ago

You don't mention the Elasticity of Supply and Demand in your analysis of tariffs. In the long run, the tariffs will impact Chinese manufacturers more than American consumers. As is the case with all tariffs, there will be some deadweight loss to both economies but more so with elastic goods being by China. I.E. China has more to lose from these tariffs because of the particular markets being targeted.

Many countries including China already had tariffs on American goods in the form of a Value Added Tax. These VATs don't recognize the American taxation system and were charging sales tax on primary goods being imported from America. The tariffs level the playing field in certain industries. EU has VATs too.

Also, industrial espionage (patent violations) and copyright infringements are problems that need to be dealt with somehow. Tariffs are a better response than war.

You mentioned there are only losers. Some American Producers will benefit that have been outpriced by Chinese producers, this is a fact as the supply of most goods from China are elastic so US companies will become more competitive as a result of the protectionist policies.

The environment will benefit as well. Less trade means fewer ships crossing the Pacific Ocean. Less aggregate demand means fewer plastic goods are produced, less electricity is consumed and factories can retool to use fewer materials and power to remain competitive. The Environment is a clear winner if more goods are produced domestically and less abroad. (Negative externalities decrease)

If the tariff revenue is spent to offset income taxes, this could have enormous benefits. Taxing consumers more and giving breaks to income earners and producers could lead to a much-needed increase in the savings rate.

Globalism has exasperated climate change, maybe this isn't such a bad thing, future generations may thank The Donald for reducing pollution (not that that was his intention). Please read my post about the subject.

https://steemit.com/economics/@crypticat/trade-wars-are-good-for-the-environment