U.S. President Donald Trump is a bully. That is how he negotiates his way through life. He bullies women for sex. As a developer, he bullied politicians for building rights. He bullies lawyers and courtiers, underlings and peers, wives and children, and lately, countries and their leaders. It is his nature.
But he probably should not try to bully the People’s Republic of China. Xi Jinping has just been made president for life in that country and he might just want to show off by stomping on that upstart Trump.
And as much as many of us would enjoy watching the stomping, it would not turn out well. Everyone loses in a trade war. A trade war is the application of onerous duties on each other’s products by two or more countries. It adds to the cost of specific products from each country. When each country reciprocates with duties of its own, it tends to stifle trade between the two countries.
In addition, companies who also make the tariffed products in the country charging the tariffs, can now charge more for their products because the tariff items become much more expensive. Check softwood lumber prices in the western U.S. and you will see the new reality.
Basic economics tells us that free trade is good for the economy and heavy tariffs are bad for the economy. And the object lesson is that trade wars are bad for all the participants. Nobody can really win. And if it is a case of outlasting your opponent, there is some reality to face here.
The Chinese tend to be more disciplined than Americans. They have suffered hardships and famines over the years. They can be more stoical.
Americans, by way of contrast, are liable to be annoyed by hardships brought on by bad management of the economy. They can be resentful. Heck, it was the way the people in London were managing their economy that set off the American Revolution. And they have not been all that amenable to the politicians who screw things up ever since.
What we can be confident of is that the Americans will have a regime change long before the Chinese. And that is why it would be really stupid for the Americans to have a trade war with the Chinese.
But, then, nobody ever accused Mr. Trump of being practical.
Copyright 2018 © Peter Lowry
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