Trade War, What Is It Good For? Absolutely Nothing
What we can do is start a cycle of tit-for-tat, and when it comes to trade, America — which accounts for 9 percent of world exports
and 14 percent of world imports — is by no means a dominant superpower.
That’s why I, like many other economists, wanted us to take a tougher stance on Chinese
currency policy back in 2010, when we had around 9 percent unemployment.
He took office amid a sustained recovery that began under his predecessor, and
that recovery had already lifted the U. S. economy to the point where “normal” policy rules apply: interest rates are above zero, monetary policy is effective again, so short-term economic management is in the fairly reliable hands of the Federal Reserve, not the chaotic Trump White House.
But the case for worrying about trade deficits, like the case for running budget
deficits, has largely evaporated now that unemployment is back to 4 percent.
A cycle of retaliation would shrink overall world trade, making the world as a whole, America very much included, poorer.
But there was always reason to be concerned about the possibility of crisis — either a crisis created
by outside forces, like some kind of financial collapse, or one created by the administration itself.
And it’s starting to look like we have a trade policy crisis on our hands.
To take a not at all random example, it makes a lot of sense to produce aluminum, a process
that uses vast amounts of electricity, in countries like Canada, which have abundant hydropower.