In 2018, Trump imposed tariffs on Chinese exports to the US. China retaliated by tariffing US soybeans shipped to China. The net result: China shifted its business to Brazil, whose soybean business has grown at the same time the domestic soybean business has shrunk by 10%. In addition, a large part of the import taxes (my recollection is more than 100%, but I haven’t found a citation to confirm this) collected from China went to farmers devastated by the tax.
And here we go again.
I’m a big fan of Paul Krugman, the Nobel Prize winner who recently left the NY Times for Substack so he could speak his mind more fully. He points out that we export mostly agricultural products to China, for which there are easy substitutes elsewhere. On the other hand, we import mostly rare earths from China–for which there are no easy substitutes. Because of this, the US is always going to be at a disadvantage in a general tariff war with China. In the important case of agriculture, we’re most likely to rack up a large net loss, meaning an outflow from the Treasury not a gain. And–this is me, not Krugman–the most stunning aspect of this is not only that the administration doesn’t know the economic theory/experience but also that it has actual experience of this reality from 2018. Yet…