Why I think the era of low import taxes and no tariffs is coming to an end:
1) The US, post ww2, adopted a free trade ideology because it benefited us at the time. We were the most powerful country economically in the world and we wanted to sell our goods tariff free.
1) The US, post ww2, adopted a free trade ideology because it benefited us at the time. We were the most powerful country economically in the world and we wanted to sell our goods tariff free.
2) We remained mostly unchallenged economically until the rise of Japan in the 1980s. Japan is demographically less than 1/10th size of China but they are pretty damn good at making cars. The supply chain for cars remains strong in the United States. Why? Because it’s tariffed.
I don’t know exactly what happened but basically between duties on their cars, our soldiers on their land, and them not being as big of an economic threat to China, USA free trade marched on as a bunch of other small countries followed Japans footsteps (SK, Taiwan, HK).
3) thé obvious game changer was China entering into the WTO in 2002, but this wasn’t an issue for the USA because at the time we could compete. It’s slowly becoming obvious that we cannot almost 20 years later. Trump tariffed them but did it wrong. He only went after China.
What he needed to do was to apply those tariffs to other countries as well, particularly Vietnam which saw a huge shift of exports to the country as makers of tariffed goods sought alternative sources. Would’ve been great if we had done it to Mexico too which seems to be unable
to get its act together.
4) The tariffs are actually politically popular. It’s Trump who is not. The Biden administration has left them in place because they know they’re somewhat popular. I think they would roll more out if they were a more confident administration.
4) The tariffs are actually politically popular. It’s Trump who is not. The Biden administration has left them in place because they know they’re somewhat popular. I think they would roll more out if they were a more confident administration.
5) Covid showed quite powerfully how important it is to have a domestic supply chain for important goods like masks and ventilators. Regardless of whether or not you think these things work, if they did, we needed them, and we only had them because largely of other countries.
China got the virus under control. If they hadn’t and didn’t have spare capacity, I assure you, the USA is getting no needed goods during a pandemic. We understand this now and that’s why you’re seeing a big push for chip development stateside.
Conclusion:
A) American goods are no longer competitive globally after years of deindustrialization caused by reserve currency and one way free trade policies
B) America needs a domestic supply chain in important sectors
C) Tariffs and duties are more politically popular than
A) American goods are no longer competitive globally after years of deindustrialization caused by reserve currency and one way free trade policies
B) America needs a domestic supply chain in important sectors
C) Tariffs and duties are more politically popular than
they appear because of their association with Trump.
All this is slowly being realized by our political class and as it crystallizes I expect to see the United States abandon the free trade policies it so loved when it benefitted us.
/end
All this is slowly being realized by our political class and as it crystallizes I expect to see the United States abandon the free trade policies it so loved when it benefitted us.
/end
Bonus: the United States used a lot of China’s playbook to develop in the after the war for independence. We didn’t enforce British Ip and we tariffed their goods to establish our own industry. I like this book explaining how to industrialize a nation.
link.medium.com/kfDGGDNRRjb
link.medium.com/kfDGGDNRRjb
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