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Z Giles's avatar

The biggest thing that’s missing here is an actual model of what Trump is trying to do with tariffs. So far, the response from folks has largely been to either throw their hands into the air, panic, and insist there can be no rationale behind them at all, or for a bunch of middle aged men who would never dream of voting Trump and who will never have had a genuine good faith conversation with a Trump supporter to give some dubious analysis on what the supposed intentions are and why it surely must be flawed, as if they have suddenly morphed into an expert on the issue.

When one actually looks into it, I’d say the arguments put forward by Michael Pettis do the best job of modelling what’s going on here (https://www.phenomenalworld.org/analysis/trade-and-the-manufacturing-share/), with possibly a few geopolitical aims thrown in.

Based on this assumption, the goal of tariffs will be A: reduce the outright trade deficit, B: force countries with large surpluses to either consume more or sell less to the US, and C: provide a geopolitical boot up the arse to relevant countries.

Under such an assumption, we’d thus expect no removal of the 10% (ensures reduction of overall deficit), persistently high tariffs on China and possibly countries like Vietnam (security threat and trade deficit that won’t be resolved), low tariffs and a cushy deal for the UK and Australia (no deficit and pays their way in defence), scary noises but quietly low tariffs to Canada and Mexico (intended ally but must spend more on security/defence), slightly more substantial concessions from countries like Chile, Peru etc who have removable deficits, and the option for the EU to either face higher tariffs or take measures to reduce the deficit. At that point, the solution is for the EU to figure out what concessions it can make and then just accept the higher tariffs on everything else - counter tariffs are unlikely to achieve anything.

As it stands, this seems like a pretty accurate set of predictions, which would imply the UK’s policy is spot on and the EU’s is doomed to fail.

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