Saturday, July 21, 2018

21 July 2018 Is There Any Benefit To A Trade War?


Is There Any Benefit To A Trade War?

 

President Trump is engaged in a dangerous “game” with other countries on trade.  Yes, China and others have taken advantage of our trade practices to exploit them to a large imbalance between each other.  We import a lot more from China than we export.  Technology that we use in China is then re-engineered so that the US companies can be sent away. A lot of Chinese technology is intellectual property that they did not honor.

 

Japan for decades has fought free trade with the US.  They want full and open access to our markets but block or severely restrict access to theirs.  European countries have done the same. 

 

I can understand the frustration the President has with this issue.  He has been very vocal about this for 30 years.  It should come as no surprise that he is taking the actions he is doing.   However, is it the smart way to go about it?  No, there is not a good reason for a trade war.  I am not sure you can site a trade war in the past that ended with both sides “winning.”  Trump looks at things from a binary perspective.  He has to win and the other side has to lose.  This is strength to him.  Trade is not like a military war were there is a winner and loser.  Trade has to be win-win. 

 

Tariffs are most corrosive aspect of trade.  They are set up to protect a nation’s capability to produce something at an inefficient rate in order to save jobs.  That is all it is about.   Some other country can do it better, but political leaders bend to the local populace. 

 

Trump putting tariffs on a lot of products from China and other countries leads to nothing but bigger challenges.  Trump wants a “fair” trade deal.  If that were true, he would negotiate with the countries.  However, he wants trade in his favor.  That is not going happen.  Until he understands that, we will continue to have the trade wars.  Nobody is winning and everybody is losing.    

 

 

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