I can’t help but be amused at the flurry of articles crying “trade war” (here, here, and here). When our trading partners engage in non-competitive activities it’s trade; when we do it’s war.
Most of China’s steel mills making most of China’s steel are government owned. They are heavily subsidized as are the government-owned coal mines that feed the furnaces that produce the steel and that produce so much of China’s particulate air pollution.
We’ve been in a trade war with China for 30 years. We just haven’t been shooting back.
I’m sure anyone who does the research can come up with a list where comparative advantage is at play, and where subsidy is at play. It’s situational. It goes far beyond steel and aluminum.
But I’m struck that the vitriol from Europe, Asia and globalist media is nothing but the paroxysms of the beast who realizes its good gig may be up. Tough titty said the kitty when the milk ran dry.
I might suggest that Europe especially has been able to play in their fanciful socialist sand box due to subsidy in products and defense. US media, academia and European pols are not stupid. Looks like an aw shit, this party is over, moment. No wonder they hate Trump.
I see Brennan let loose with both barrels. Same thing. As they say these days, they must be getting squarely over the target.
I suspect that comparative advantage is not operative anywhere. People buy the lowest price regardless of relative pricing. They’ve obviously never read Ricardo.
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Incidentally, while many have been quick to slam Trump’s strategy, at least one hedge fund believes that Trump is correct in his trade war stance. Here is Stephen Jen from SLJ Macro Partners:
“The US is the least protectionist large economy in the world, while China is the most protectionist. In our note on this subject a couple of weeks ago, we pointed out that the US, based on data from the WTO, is by far the least protectionist nation in the world (with the exception of a tariff-free city state like Hong Kong) — far more open than Europe, Japan, and especially China. And it seems a bit hypocritical to us that more protectionist nations are complaining about the actions of the least protectionist nation.
Excess capacity in China. China has half of the world’s steel production capacity, much of which is excessive and unnecessary, even Beijing would admit. The 2008-09 RMB4 trillion stimulus in China further boosted China’s industrial capacity, including in steel and other sunset industries. This has led to a situation where Chinese steel production had to be exported to the rest of the world at very low prices. Some in the US, not surprisingly, consider this ‘dumping’. Further, both the US and the EU share the verdict that China is still not a ‘market-based’ economy, because of the large and persistent explicit and implicit government subsidies, and other forms of support from the public sector, that make Chinese products unfairly competitive.
Why is Europe not held to the same standard as the US? Europe is complaining about the US’ latest policy. Investors should know that Europe has already imposed two dozen anti-dumping measures against Chinese steel exports. What then is the substantive difference between the anti-dumping measures imposed by the EU and what the Trump Administration is doing? Is Europe less protectionist than the US? If Europe were so open, what is all the fuss about Brexit and the inability of the UK to access the European market?”
One could say foreign critics have “concerns.” Or, more colorfully, as I noted in another comment, they are wailing like stuck pigs with their ability to slop at the trough threatened.
China’s massive industrial and trade subsidies lead to China’s dumping. That’s not a bit surprising. China does it to keep unemployment low and to control the market.
But China is not a trustworthy steward of half of the world’s productive capacity. As PD notes it dumps not only on us but on other countries which in turn dump on us. China’s strategy is akin to climbing up a ladder and pulling it up after you. The greatest victims of China’s predatory behavior are other developing countries that would like to follow the trail that Japan, South Korea, and China have blazed but can’t because of China’s overcapacity.