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Well done article, though China has legit grounds for banning ractopamine.

What every article on these “trade wars” misses, in my opinion, is that the US sells China mostly commodities while China sells the US lots of high tech. The effect of a bilateral tariff on commodities is simply to move purchases around. By this I mean that China shifts its soy purchases to Brazil, which has only a fixed amount to sell. Thus, Brazil has less soy to sell the EU, which thereafter buys more soy from the US.

To the extent that there are dedicated US supply chains for moving these commodities through China, they atrophy short and (especially) long term. Brazil builds up its China supply chains. The real impact of a tariff war vis-a-vis agricultural commodities revolves around these supply chains. The real US aim of these trade wars (around our exports) is to reduce our country’s reliance on these supply chains; and the payoffs to the US are long term. Our long term ability to disengage from China trade revolves around the pivot we are making away from these China supply chains.

As for US imports of China high tech, these are NOT commodities of course; and China has market power. It is implausible that China would price these goods in a highly inelastic portion of the demand curve (firms with significant market power would never do so), and as such it is likely that China is bearing a disproportionate economic burden from these tariffs.

And moreover, supply chains for this high tech will move out of China long term and toward Thailand, Vietnam, Taiwan etc, even Mexico. In this case there is a double payoff to the US. First, the US becomes less reliant over time on China high tech. Second, China forfeits is hegemony over Asian supply chains that has given it so much profit in recent years.

This is all basic economics, taught with great confidence in undergraduate economics classes everywhere. I’m not sure why it does not make it into mainstream media discussions of the topic.