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It is hard to see much systemic thinking in the new round of tariffs, and because trade can only be resolved on a systemic basis, and not on a bilateral basis, this means that they are unlikely to be very helpful.
https://www.nytimes.com/live/2025/04/02/business/trump-tariffs-liberation-day?smid=tw-share
It is hard to see much systemic thinking in the new round of tariffs, and because trade can only be resolved on a systemic basis, and not on a bilateral basis, this means that they are unlikely to be very helpful.
https://www.nytimes.com/live/2025/04/02/business/trump-tariffs-liberation-day?smid=tw-share
Comments
I celebrate it as the possible outline of a new trading system.
Perhaps other nations might do similar, before getting together to agree something sensible that suppresses persistent imbalances (Bancor 2.0?)
Unfortunately it is also very hard to discuss tariffs in a non-hysterical way. They are neither the panacea that the Trump administration supposes they are, nor are they the instrument of Satan, as most American economists truly believe them to be.
They are simply one of many industrial policy tools designed to tax consumption and subsidize production, and as such can be expansionary under certain circumstances and contractionary under others. In fact other policies can be much more effective.
I'd argue, for example, that tariffs are a relatively minor contributor to China's trade surplus. Far more important ways to tax consumption and subsidize production in China have been its undervalued currency, a financial repressed banking system that...
directs credit to favored sectors, factors that have limited wage growth relative to productivity growth, and overspending on logistical infrastructure. Tariffs are supposed to work by doing the same thing, but they are usually less efficient ways of doing it.
While some countries may retaliate against US tariffs by raising their own tariffs on US goods, other countries will find far more effective – and less visible – ways to do so, by depreciating their currencies, for example, or by directing more cheap credit to manufacturers.
To make matters worse, the new tariffs don't really address the real US problem. One obvious reason is that the tariffs are largely bilateral, and while bilateral imbalances may impress those who don't understand trade and capital flows, they are in fact pretty useless.