@millercarbon @nonoise
Many thanks to both of you for posting salient points. @inna , salient means “really bitchin”. The real problem, of course, is that there is no way to know absolutely for certain because there are so many forces at play. Some food for thought...
As we all know, the old saying goes “those who ignore history are doomed to repeat it” and “its different this time”. Those two statements have cost alot of smart people alot of money over the centuries. I would also submit that to assume that past tariff actions and outcomes are applicable today is dangerous. The good news/bad news at least is the current tariff decision maker doesn’t read history so we will have a few random decisions and data points to analyze in the centuries to come.
I would submit that tariff policies prior to 1929 should be evaluated individually and there was typically a strong player being punitive with another strong player. In modern history, there was alot of back and forth between the USA and Great Britain. There are certainly other examples but that is the relationship most often examined. They/we were the only world powers at the time with momentum.
Now fast forward...there are plenty of choices of trading partners today that simply were not factors prior to the early twentieth century. The largest democracy on earth today (India) was enslaved at the time by Great Britain. Same goes (for all practical purposes) for China. Between the UK and Japan, China has been exploited for much of modern history and every european country seemed to have “claimed/colonized” every square inch of South America, Central America and let’s not forget the African continent and the middle east. Again, colonies all.
Prior to the second world war, oil was controlled by the US and the UK and it was traded in British pounds. Tariffs end up being either protectionist or punitive. In today’s integrated, global economy where information, shipping, fund flows, data flows and communication is virtually instantaneous its naive to believe a punitive tariff will change the behavior of countries with a choice. Mexico doesn’t have a choice...that’s like beating up the gentle little kid next door. Sure, you can win but what do you win?
Now let’s look at China. They are 20 years from not giving a darn what Washington does because they have wisely invested and diversified. They have almost reached economic parity with the USA in a little more than 1 generation. The present tariff policy in Washington amounts to kicking a lion cub....try that when they finish growing. And China is growing and is unstoppable. The EU, South America and Africa will buy their steel. Australia has become an economic colony of China. I don’t lament any of this as its the natural progression of things. Countries rise and fall throughout history. The silk road predated the USA and China isn’t just a flash in the pan, its real and has critical economic mass without the constraints of those pesky issues like an opposition to pay to play (read:bribery) cultures, etc.
So, since no one has a perfect crystal ball, all we can do is guess. My guess though is our present tariff strategy will hasten the development of a world economy dominated by the Chinese first, then the USA/Britain will be fighting it out to stay ahead of the EU but when the former Soviet block aligns (and I include Russia) with the EU they will lap the USA/Britain without the anglo influenced mitigator. So, there we have it...or not. I could be completely off base and China may run home at the idea they might see a mean tweet, get their feelings hurt and capitulate. What do you think they will do? They already build a better Tesla than Tesla AND have these really cool pods scattered everywhere that you can pull your electric car into and in 5 minutes you drive out with a freshly charged battery pack swap!!! For half price. They have another strategic advantage over the west that they haven’t had to use. I hate to say it but they can press their populace into instant austerity at the stroke of a pen. Its not morally something we believe palatable but they are not going to blink guys, they don’t have to have us. Oh, and if you don’t think the North Korea/US “conversations” aren’t a Chinese test marketing of how to negotiate with the USA well.....
Their final ace up their sleeve, they can begin to sell the huge cache of US treasuries they own to fund any trade issues for the near to medium term. What will that do to the yields the USA would have to provide to future purchasers of treasuries. In the past, someone would just start a war and take what wasn’t rightfully theirs. That’s impossible in the information age with a militarily powerful country in the nuclear age.
Who is betting against China? That would be like betting on your local high school againt the New England Patriots. Its really sweet sentimentally. We need them to need us but we can’t force that as in decades past.
Many thanks to both of you for posting salient points. @inna , salient means “really bitchin”. The real problem, of course, is that there is no way to know absolutely for certain because there are so many forces at play. Some food for thought...
As we all know, the old saying goes “those who ignore history are doomed to repeat it” and “its different this time”. Those two statements have cost alot of smart people alot of money over the centuries. I would also submit that to assume that past tariff actions and outcomes are applicable today is dangerous. The good news/bad news at least is the current tariff decision maker doesn’t read history so we will have a few random decisions and data points to analyze in the centuries to come.
I would submit that tariff policies prior to 1929 should be evaluated individually and there was typically a strong player being punitive with another strong player. In modern history, there was alot of back and forth between the USA and Great Britain. There are certainly other examples but that is the relationship most often examined. They/we were the only world powers at the time with momentum.
Now fast forward...there are plenty of choices of trading partners today that simply were not factors prior to the early twentieth century. The largest democracy on earth today (India) was enslaved at the time by Great Britain. Same goes (for all practical purposes) for China. Between the UK and Japan, China has been exploited for much of modern history and every european country seemed to have “claimed/colonized” every square inch of South America, Central America and let’s not forget the African continent and the middle east. Again, colonies all.
Prior to the second world war, oil was controlled by the US and the UK and it was traded in British pounds. Tariffs end up being either protectionist or punitive. In today’s integrated, global economy where information, shipping, fund flows, data flows and communication is virtually instantaneous its naive to believe a punitive tariff will change the behavior of countries with a choice. Mexico doesn’t have a choice...that’s like beating up the gentle little kid next door. Sure, you can win but what do you win?
Now let’s look at China. They are 20 years from not giving a darn what Washington does because they have wisely invested and diversified. They have almost reached economic parity with the USA in a little more than 1 generation. The present tariff policy in Washington amounts to kicking a lion cub....try that when they finish growing. And China is growing and is unstoppable. The EU, South America and Africa will buy their steel. Australia has become an economic colony of China. I don’t lament any of this as its the natural progression of things. Countries rise and fall throughout history. The silk road predated the USA and China isn’t just a flash in the pan, its real and has critical economic mass without the constraints of those pesky issues like an opposition to pay to play (read:bribery) cultures, etc.
So, since no one has a perfect crystal ball, all we can do is guess. My guess though is our present tariff strategy will hasten the development of a world economy dominated by the Chinese first, then the USA/Britain will be fighting it out to stay ahead of the EU but when the former Soviet block aligns (and I include Russia) with the EU they will lap the USA/Britain without the anglo influenced mitigator. So, there we have it...or not. I could be completely off base and China may run home at the idea they might see a mean tweet, get their feelings hurt and capitulate. What do you think they will do? They already build a better Tesla than Tesla AND have these really cool pods scattered everywhere that you can pull your electric car into and in 5 minutes you drive out with a freshly charged battery pack swap!!! For half price. They have another strategic advantage over the west that they haven’t had to use. I hate to say it but they can press their populace into instant austerity at the stroke of a pen. Its not morally something we believe palatable but they are not going to blink guys, they don’t have to have us. Oh, and if you don’t think the North Korea/US “conversations” aren’t a Chinese test marketing of how to negotiate with the USA well.....
Their final ace up their sleeve, they can begin to sell the huge cache of US treasuries they own to fund any trade issues for the near to medium term. What will that do to the yields the USA would have to provide to future purchasers of treasuries. In the past, someone would just start a war and take what wasn’t rightfully theirs. That’s impossible in the information age with a militarily powerful country in the nuclear age.
Who is betting against China? That would be like betting on your local high school againt the New England Patriots. Its really sweet sentimentally. We need them to need us but we can’t force that as in decades past.