At Forbes Kenneth Rapoza provides a good, two sentence summary of the several rounds of tariffs and counter-tariffs the media are calling a “trade war”:
If the editorial board over at the WSJ and the FT and The Economist are right, then all this ends badly for both sides. If they are wrong, a better trade arrangement is worked out before it all goes to hell in a handbasket.
Before you can make a judgment about what effect the tariffs will have on the status quo ante, you should understand what it was. The old system encouraged consumption and the taking on of debt while increasing income inequality.
I believe in free trade with all my heart but what we’ve had isn’t free trade. Our average tariff rate is 5%; China’s is 25%. And that was before the first round of tariff increases between the two countries began. We subsidize some export goods, mostly agricultural, but we’re pikers by comparison with the Chinese. China has been dumping steel and aluminum made in government-owned plants for over a generation. I don’t believe there is any viable substitute in the U. S. for a diverse economy which includes robust heavy industry, light manufacturing, and agriculture along with service industries and finance. We should put policies in place which effectuate that even if it does raise prices and lowers GDP by a couple of points.