Are trade wars good (and for whom)?
Recent news has made it plain that President Trump intends on going through with his much discussed plan of implementing tariffs on many sources of steel and aluminum imports to the US. This seem as good a time as any to ask a question that begs for evidence: Are trade wars good, and who benefits?
There is good reporting out there that analyzes the likely impact of this particular steel tariff, so feel free to find it and use it in your own argument (there are figures the administration has produced and figures that other studies have produced using the same source material). There are also plenty of other tariffs out there throughout history that have been studied and discussed. Because these sources can sometimes conflict, please be aware that your choice of what sources to use may need to be justified.
No, they hurt the vast majority to help a privileged few
I'm aware of the argument that ties the Great Depression to a rise in isolationism, and reactionary imperialist nationalism. But I'm not so sure how much of that can be rested on tariff's shoulders. Nationalism had its roots in the failed revolutions of 1848, and continued its militaristic push into the early 20th century all throughout europe. It could be argued that the failure of the institutions of Europe to learn the lessons of what caused the revolutions of 1848 led more directly to the conflicts at the beginning of the 20th century than many other competing culprits.
So in a sense, what I'm saying is that this argument can potentially confuse two colliding trends with one causing the other. National policy of powerful nations was to look inward and rely on their own industries--as foreign policy for the past several centuries centered around a mercantilist idea of trade. Equating isolationism in an international climate tilted toward mercantilism with isolationism in a globalist international climate seems like comparing apples to oranges.
Trade wars increase the cost of goods that could be cheaper obtained globally. A tariff on steel for example helps out the nation's steel industry at the expense of increased cost of steel for everyone else in the country including other goods within the country made from steel.
It hurts the majority to help a privileged few
This argument, I buy, especially because I have seen corroborating evidence that supports your claim, specifically that:
These estimated job impacts being ripple-effects from the increased prices of steel and aluminum. In the context of the US economy, those job changes amount to rough one or two month's worth of recent jobs gains,
It makes sense logically but I'm glad there is also coorborating evidence
Honestly, China dumping steel is problematic. But that's something that can probably be addressed other ways.
Banning German car manufactures is nonsense and placing a tariff on our allies in the name of national security is laughable logic.
I'm no expert on the issue, but the argument I've heard in favor of steel and aluminum tariffs in particular is that there is a national security concern with allowing the current trend to continue that would eventually result in the US having little or no capacity to make its own steel and aluminum for defense purposes. A lot of the steel and aluminum currently being used for things like planes, tanks and missiles is alreayd being imported from other countries.
Do you remember where you've heard that argument? I'd love to see the paper or article.
I think that argument has been made for a while now. I'm not qualified to say whether it's a valid argument or not, but there's this recent article from Reuters that talks about it.
That's an argument coming from a member of Trump's cabinet, who may feel pressured to argue in favor of Trump's policies. The defense department's own memo says that the amount of steel and aluminum used for defense is only a small percentage of the U.S.'s own production, so clearly there is no urgent threat of the U.S. not being able to meet its defense needs internally. Plus, the latest tariffs aren't even on China: most of them are falling on NATO members, who are extremely unlikely to stop exporting to the U.S. in the event of a war.
Thanks for linking that article. It does provide helpful insight, but I'm not sure it proves the argument you heard about.
For starters, the central figure in the article seems to be that 3% of US production goes to direct defense needs, which is a mighty small figure in the grand scheme of the total US economy. That basically implies that there will almost never come a time that domestic steel and aluminum would be insufficient for direct defense needs, unless that amount falls to almost zero.
So the major missing component for this argument to work is how much of the US market depends on imported steel and aluminum. If that amount is greater than 97%, then the argument works (and holy shit, if that were true). Unfortunately, that's flat wrong. The important information from this review of trends up to 2017 is on page 6, and it shows that domestic production of steel accounts for consistently between 66%-70% of the total US market of steel production since 2014. These are comparably higher numbers than the recession years of 2009 and 2010, but compared to historical averages? No idea.
The point is, for direct defense being 3% of the US market needs, and the domestic market producing 66-70% of US consumed steel, that information provided in that memo pretty firmly and roundly debunks any claim that this is for any direct defense needs.
The point that article makes clearly, I think, is that steel and aluminum tariffs can be used to bring "bad actors" who have "a systematic use of unfair trading practices" to a negotiating table, basically countries that are intentionally using unfair trading practices to materially undermine American industry. The tariffs that are being put in place don't seem to have that goal.
Trade wars are never good. They're wars without the goal of conquering land or resources but with all the economic fallout.
I think I get where you're coming from, but do you know of any studies or other theorists that quantify that fallout? There have been several tariffs and reciprocal actions taken throughout history. Surely there is some evidence out there that supports your view.