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1/
WOW!

Trump TRASHED Bush/Obama trade policy toward China. He scrapped their engagement approaches - SED, S&ED - in favor of trade war. Now?

Oops!!! We need those very same Bush/Obama approaches after all.

Turns out, trade wars are not easy to win.
wsj.com/articles/washi…
2/
Here is where things stand on tariffs, even with the Phase One Deal Trump has said he will sign on January 15.

Tariffs remain on more than half US-China trade.

Tariffs are the new normal.

piie.com/blogs/trade-an…
3/
US-China HISTORY:

Under BUSH, the continuous engagement approach was the Strategic Economic Dialogue (SED) -> eg, piie.com/commentary/tes…

Under OBAMA, the continuous engagement approach was the U.S.–China Strategic and Economic Dialogue (S&ED) -> eg, piie.com/commentary/tes…
4/
To be clear, a resuming continuous US-China ENGAGEMENT on trade policy IS GOOD NEWS.

The main points are

(1) this approach is not new
(2) it should have been there all along
(3) Trump's decision to destroy its original incarnations has implications and A LOT of costs
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More from @ChadBown see all

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Chad P. Bown
@ChadBown
1/
 Interpreting Trump's Tweets:

• Dec 15 Trump tariffs of 15% on $160 bn do NOT go on

• Sept 1 Trump tariffs of 15% on some of $110 bn cut to 7.5%

• Remaining on entirely are Trump tariffs of 25% on $250 bn (imposed at 10% in 2018, increased to 25% in June 2019)
2/
The details of the text are what matters. Ie, what will be the deal regarding "structural changes" on

(1) China's industrial subsidies & SOEs

(2) forced technology transfer & IP protection

ie, these were statutory reasons behind Section 301 tariffs - and Trump's Trade War
3/
Trump Tweets China is making "massive purchases of Agricultural Product, Energy, and Manufactured Goods"

Does it mean Beijing just lifts SOME of its retaliatory tariffs?

If so, then we are back to where we were earlier in 2019 - NOT pre-Trade War

Text details will matter.
Read 6 tweets
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Chad P. Bown
@ChadBown
1/
ECONOMICS and HISTORY

Trump has decided to convert his import quotas on Brazil and Argentina to 25% tariffs on steel and 10% tariff on aluminum.

There is a lot to parse through here, some of it is counter-intuitive...
2/
ECONOMICS

First, we have to be clear about the COUNTERFACTUAL.

The status quo was NOT the Trump giving free trade to Argentina/Brazil steel and aluminum

Argentina/Brazil faced binding import quotas limiting the volume of steel and aluminum each could sell in the US market
3/

With the steel and aluminum quotas, there was NO process for the US to sell licenses to earn revenue from foreigners getting access to the US market.

By now, Argentine and Brazilian firms will have figured out how to RESTRAIN their steel/aluminum exports to fill the quota.
Read 11 tweets
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Chad P. Bown
@ChadBown
1/
NEWS: WTO to authorize US tariffs on $8 billion of EU exports due to illegal subsidies provided to Airbus, report @BBaschuk @SDonnan & J Stearns
___

News is the $8bn number

The $8 bn would be the biggest authorized retaliation in WTO history...

bloomberg.com/news/articles/…
2/
The largest PRIOR WTO authorized retaliation was $4 billion.

That was the "US - Foreign Sales Corporation" (FSC) dispute of 2002 that the EU won and was authorized to retaliate against the US...

--> chadpbown.com/wp-content/upl…
3/

Once the report is public, we'll see HOW the arbitrators came up with the $8 billion limit.

Historically, depending on the type of dispute, arbitrators have focused on one of two approaches.

I describe the different ways in this paper... 🤓🤓🤓

-> chadpbown.com/wp-content/upl…
Read 6 tweets

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On the topic of trade, I suspect #China is happier about Trump’s #TradeWar than many suppose. Sure, China will feel some short to mid term pain from these disruptions; however, the United States is leaving behind a very large vacuum in the international community. /1
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