What should other nations do? My strong recommendation to Canada, Mexico, Japan, the United Kingdom, and the European Union is to join together to create a free trade zone that excludes the United States, imposing at least a 10 percent tariff on all imports from America.
They should also threaten to limit American banks’ access to their public stock markets, put limits on what their citizens can invest in American companies annually, and increase taxes and regulations on American digital platforms.
They will be tempted to negotiate and do so individually. They should not. They need to negotiate from a position of strength. A non-U.S. free trade union will give them that strength.
Okay let’s try this on an example. ArcelorMittal in Belgium producing steel and exporting it to USA. Since they put tariffs on us, it will reduce how much we will sell to USA. Lowering demand. Good for Europe as now steel will be cheaper locally. Bad though because lower demand and lower prices will hit the profit margin, causing parts of the factory to be shut down and labourers to be layed off.
What prevents ArcelorMittal from opening a factory in USA to avoid the tariffs?
In general, making these investments takes 3 to 4 years and by then trump administration will be replaced. The short term effects of the trump administration is going to be so catastrophic that the potential gains will only be visible long after trump is gone.
The shock will cause the population to elect someone that will lower tariffs. Most definitely. For better or worse of USA. Only countries like China can do such long term economic shifts because their leadership stays the same for a long period of time.
So, companies in this case will be afraid of moving to USA. Trump is fucking his country up.
I agree, no need for retaliatory tariffs.
But let’s say this would be a trade war with China, a stable government.
Different example.
The car industry in Europe Vs the surge of China’s electric vehicles.
We could have electric cars for as cheap as 8000 euros. As consumer this would be fantastic.
But the car industry is a gigantic part of our economy. Wouldn’t it be better to shift them toward competing with china’s industry?
China subsidises their electric vehicles.
What should we do? Accept the Chinese taxpayer’s funding of the cars that we consume in Europe?
Is this risky long term? We would start depending on China for car imports. We would lose a key industry in our region. With Russia we learn that we need to be independent in our key industries.
What should we do in this context you think?
In that context I think tariffs are absolutely valid. In particular, as you mention, because China is subsidising their EV market and thus discounting the export price. A tariff should raise the price of the imported good such that the local good can compete - and we’ve seen this with extreme tariffs on Chinese EVs. Trump actually led the way on this in his first presidency, proving he is the proverbial broken clock. Now Europe also has tariffs on Chinese EVs.
Ideally, this should also involve ring fencing the tariff revenue and exclusively re-investing it into incentives for local businesses to pick up the slack of the imported businesses. This rarely happens, but it should.
This doesn’t work when tariffing the US, though. The US is often already more expensive for the things people import from there. People buy US goods and services because they want the US version; there is no better alternative. The tariff just makes US products even more expensive, costing buyers more. The only thing it does is raise revenue for the government.
In other areas even tariffs against China have been meaningless. If China sells a trinket for 1/10 the price of local industry, then even a 100% tariff would mean the Chinese product costs 2/10 of the local price. People will still buy the Chinese product over the local one, but now they just pay more. Maybe they buy less, so Chinese businesses make less money, but they’ll probably pay more overall. The government get this extra money. This is what Trump is doing in the US with his general tariffs on China, there’s no plan behind them and they’re all but meaningless - the only thing they do is raise tax revenue for the government.
If the only thing a retaliatory tariff does is raise revenue for the government, then it’s no better than what Trump is doing.
A good tariff should minimise the effect at home and maximise the effect against the foreign country the tariff is meant to penalise. I don’t think that’s viable with import tariffs against the US, the effect at home just isn’t worth the minimal damage it would do to US businesses.
Yeah we should focus on key industries that we can gain from. A general tariff is pretty insane.
We just gained a global discount thanks to trump on our imports on products that we can utilise adequately.
Thanks for the explanation