Thursday, May 16, 2019

Trade Wars

I have always been a bit nervous about Trump's trade war with China.  Free marketeers point to the Hawley-Smoot Tariff Act of 1930, which turned what would have been a short recession into the Great Depression, as other countries retaliated against our increased tariffs, causing an enormous reduction in international trade and thus jobs.

The China situation is different.  One country is the target because of its artificial valuation of the yuan.    Retaliation by China will not affect trade relations with other countries, many of whom are also victims of China's dumping. 

5 comments:

  1. Wasn't this artificial undervaluation the same thing Japan did with the Yen until about 1982, when they no longer could sustain the undervaluation? I still have a book in my library called "Japan as Number One; Lessons for America" that said we had to have a more mercantilist strategy with corporate supports and subsidies of worker expenses in order to compete with Japan (at least until the cost of supports and subsidies proved too expensive for Japan). We don't hear much about Japan as Number One any more.

    ReplyDelete
  2. Most modern appraisals of the depression think the New Deal did more to do with prolonging it than Soot-Hawley and other tariffs.. The attempt to build up government spending sucked up all the capital that would have been used in private sector more efficiently. -- see the Forgotten Man

    ReplyDelete
  3. The big benefit to the so-called trade war is starving the swamp. China spends their dollars not o Us goods but on govt debt. Something like a third of all debt is held by China

    Now, both in retaliation and because they need the money ,they are pulling back.

    Starve the swamp!

    John Henry

    ReplyDelete
  4. How about Instead of calling them tariffs, we call them a value added tax.

    John Henry

    ReplyDelete
  5. China is also targeted for its intellectual property theft, and its state investment in industries to enable them to out-compete foreign companies.

    Our hands are not clean in this, but compared to China, we are pure!

    ReplyDelete