Tuesday, January 10, 2017

What Will China Do If Trump Places a Tariff on Goods Imported From China?

Here's one view. A huge trade war will breakout.

From an interview exchange between NPR host Scott Simon and  NPR's economics correspondent John Ydstie:
SIMON: So what happens if President Trump follows through and he levies 45 percent tax on goods imported from China?

YDSTIE: Well, I asked that question to Doug Irwin, who's a trade expert at Dartmouth, and he says it's pretty clear from experience that China would retaliate hard.

DOUG IRWIN: They've already done that in the past when we have imposed the anti-dumping duties or special duties on some of their goods. All of a sudden, the Chinese airlines start buying Airbus instead of Boeing. They start buying Argentine soybeans instead of American soybeans. They really shift their product purchases away from the United States in response.

YDSTIE: Scott, Irwin says some limited, targeted tariffs might be successful. But if Trump uses these powers in an undisciplined way, it could spark a trade war and it could hurt the U.S. economy and the global economy.
RW note: Not even " limited, targeted tariffs" make any sense but all indications are that Trump is going to use a bazooka strategy when it comes to tariffs.


  1. Well I have a couple questions. If China buys Airbus instead of Boeing, and that is indicative of a major change in their purchases; what will they do with the hundreds of millions of dollars of USG bonds? Right now they can buy lots of Boeing jets of high technology and great worth, but if they want to buy nothing from the USA they need to sell their dollars and buy Euro, the value of the dollar might go down so their current sales may erode the value of their large holdings.

    They seem to be tied at the apron strings to the US economy. They are like a callow adult son who cannot become independent. Before Trump the son manipulated and scared the parents into never changing anything as long as things were going ok in the dysfunctional family.

    There will be no trade war. Thew US is the worlds engine of growth because it is the freest large economy. When DC finally takes over all the economic activity in the US we will no longer be exceptional nor will be the engine of economic activity.

  2. America is the customer. It has the stronger hand. The cards China is holding is pure bluff.

    What we will see is Chinese tariff and non tarriff barriers come down. Meaning more free trade,not less.

    1. Do you really believe this? That the Chinese would not only not retaliate but actually liberalize trade? I mean, that is what they SHOULD do but I feel like you've gotta be trolling if you claim that you truly expect that to happen.

    2. Yes, I expect it for the reasons that I outlined. They don't have much of a hand to "retaliate" thanks to their mercantalist policies.

    3. I believe Trump has alluded to the notion of tariffs or threats of tariffs as weapons for extracting trade concessions from other governments, and I can at least partially understand the logic of that stance. However since then, he's surrounded himself with crank economic advisors who actually advocate tariffs for economic and not merely political reasons, and his rhetoric on trade has tended far more to the inflammatory and confrontational rather than the conciliatory side, so it doesn't appear that even he is pushing that angle anymore.

  3. Evan, kindly until Trump is president before judging his for his actions (because he as yet has no actions as president).

    120 days seems like a fair amount of time to determine what kind of president he will be.

    1. I agree that the first ~100 days will be telling but I'm not sure what you mean about "giving him a chance." Anything he does that actually makes humans freer I will applaud.

      And IMO his words alone have been damaging. A lot of people for whatever reason look up to him, and each time they hear him rail against the idea of allowing economic actors to freely associate, a lot of them become a little more statist. People are nationalist enough as is, and it's no virtue to rile up still more nationalism. So I will absolutely call him out on that (even while still holding a sliver of hope that it's all just red meat.)