Diagram below clearly shows who has the leverage in a trade war.
Pride is a difficult meal to digest, and causes great discomfort before it is reduced to humility and a new respect for rivals.
Few tools are without a second purpose, or even multiple uses and applications.
To China -You drop the tariffs and non-tariff restrictions, and all this goes away.
Diagram below clearly shows who has the leverage in a trade war.
I concede, I have learned more about international trade in the last several months than all of my previous life. My understanding of this complex economic construct has forced me to reconsider some previously held opinions and positions.
That said, there is quite a bit more to international trade than just tariffs. Tariffs are just taxes to increase the price of goods to local consumers. This price increase is paid by the consumers, us. That is supposed to drive down demand for imported goods and drive up demand for cheaper locally manufactured goods. If our products are made cheaper over seas, our exports are in demand and we produce more here and sell more there = more jobs, better economy. But if only it were that simple.
Each country creates fiscal policy and adjusts taxes and fees and regulations beyond simple tariffs. The local population doesn't see the effects of total economic policies (foreign and domestic) in the price of goods. Here are some examples I understand.
In Mexico, there is a VAT tax. All consumers pay and extra tax on all goods at the point of sale.... except there are some products exempted, especially in manufacturing and certainly with regards to import/export manufacturing. If materials are shipped into Mexico and manufactured into parts or products and then exported, they are exempt of the VAT tax (20%). So all (or most) products in Mexico cost 20% more than they should. It balances out and works into the cost of living (and the standard). So Mexicans do not see a large price disparity overall between product options. But by exempting a product, process, etc. from the VAT, you can incentivise behavior. You lower the price and produce a situation where one industry or product can be more competitive in any market (domestic or foreign). This is just one example.
China manipulates it's currency to create competitive pricing and incentivise supply. Europe is famous for regulations (as is the USA). When all inputs are collaborated for any individual economy, the labor cost disparity is found to be only one component of the international trade disparities and drivers.
Trump's reducing the EPA emmissions and fuel economy (CAFE) standards and requirements are meant to make American cars more competitive here and in foreign markets. I now think that while Trump is using Tariffs as the general term for simplification, he is working all fronts to both make America more competitive and level the playing field in our "partners" countries.
I do still believe this hurts our economy in the short term (a little), we are in a position to absorb the short term pain. Our economy is humming and wages are going up. So we may not even notice that commodities prices are going up. However, Our competition cannot afford the hit to their economies. Trump is a President playing the long game, FOR ONCE.