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In the growing global trade conflict, countries that rely on large manufacturing surpluses to resolve their domestic demand weaknesses are not in very strong bargaining positions. Their very large and very competitive manufacturing sectors are...
In the growing global trade conflict, countries that rely on large manufacturing surpluses to resolve their domestic demand weaknesses are not in very strong bargaining positions. Their very large and very competitive manufacturing sectors are...
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large and competitive for precisely the same reason that domestic demand is very weak -- implicit transfers from households that subsidize manufacturing and reduce domestic demand.
If that weren't the case, they wouldn't be running such large, persistent trade surpluses. The whole point of having vibrant manufacturing exports, after all, is to pay for the imports that raise domestic living standards.
But if their manufacturing sectors are so large and so competitive because of the same factors that account for their weak domestic demand, they need the rest of the world to absorb their trade surpluses in order to maintain their manufacturing prowess.
That puts them in a very tough position. As the US learned with its Smoot-Hawley tariffs, the worst outcome for manufacturing economies that rely on persistent surpluses is an intensification of trade conflict.
https://www.foreignaffairs.com/united-states/how-tariffs-can-help-america
In their trade talks all they can ask for is that the world abandon trade conflict, which means that the rest of the world continue absorbing their domestic trade distortions, even though it is those very distortions that set off the trade conflict.