BARRY EICHENGREEN：The Economic Consequences of Trump’s Trade War

龙血树

The Economic Consequences of Trump’s Trade War
Jul 12, 2018 BARRY EICHENGREEN

For those who observe that the economic and financial fallout from US President Donald Trump’s trade war has been surprisingly small, the best response is that a lagged effect is exactly what we should expect. Just wait.

BERKELEY – US President Donald Trump’s phony, blowhard’s trade war just got real.


THE ECONOMIC CONSEQUENCES OF TRUMP’S TRADE WAR
Jul 12, 2018 BARRY EICHENGREEN asks why the effect of escalating protectionism on investment and financial markets has been so limited.

The steel and aluminum tariffs that the Trump administration imposed at the beginning of June were important mainly for their symbolic value, not for their real economic impact. While the tariffs signified that the United States was no longer playing by the rules of the world trading system, they targeted just $45 billion of imports, less than 0.25% of GDP in an $18.5 trillion US economy.

On July 6, however, an additional 25% tariff on $34 billion of Chinese exports went into effect, and China retaliated against an equivalent volume of US exports. An angry Trump has ordered the US trade representative to draw up a list of additional Chinese goods, worth more than $400 billion, that could be taxed, and China again vowed to retaliate. Trump has also threatened to impose tariffs on $350 billion worth of imported motor vehicles and parts. If he does, the European Union and others could retaliate against an equal amount of US exports.

We are now talking about real money: nearly $1 trillion of US imports and an equivalent amount of US export sales and foreign investments.

The mystery is why the economic and financial fallout from this escalation has been so limited. The US economy is humming along. The Purchasing Managers’ Index was up again in June. Wall Street has wobbled, but there has been nothing resembling its sharp negative reaction to the Smoot-Hawley Tariff of 1930. Emerging markets have suffered capital outflows and currency weakness, but this is more a consequence of Federal Reserve interest-rate hikes than of any announcements emanating from the White House.

There are three possible explanations. First, purchasing managers and stock market investors may be betting that sanity will yet prevail. They may be hoping that Trump’s threats are just bluster, or that the objections of the US Chamber of Commerce and other business groups will ultimately register.

But this ignores the fact that Trump’s tariff talk is wildly popular with his base. One recent poll found that 66% of Republican voters backed Trump’s threatened tariffs against China. Trump ran in 2016 on a protectionist vow that he would no longer allow other countries to “take advantage” of the US. His voters expect him to deliver on that promise, and he knows it.

Second, the markets may be betting that Trump is right when he says that trade wars are easy to win. Other countries that depend on exports to the US may conclude that it is in their interest to back down. In early July, the European Commission was reportedly contemplating a tariff-cutting deal to address Trump’s complaint that the EU taxes American cars at four times the rate the US taxes European sedans.

But China shows no willingness to buckle under US pressure. Canada, that politest of countries, is similarly unwilling to be bullied; it has retaliated with 25% tariffs on $12 billion of US goods. And the EU would contemplate concessions only if the US offers some in return – such as eliminating its prohibitive tariffs on imported light pickup trucks and vans – and only if other exporters like Japan and South Korea go along.

Third, it could be that the macroeconomic effects of even the full panoply of US tariffs, together with foreign retaliation, are relatively small. Leading models of the US economy, in particular, imply that a 10% increase in the cost of imported goods will lead to a one-time increase in inflation of at most 0.7%.

This is simply the law of iterated fractions at work. Imports are 15% of US GDP. Multiply 0.15 by 0.10 (the hypothesized tariff rate), and you get 1.5%. Allow for some substitution away from more expensive imported goods, and the number drops below 1%. And if growth slows because of the higher cost of imported intermediate inputs, the Fed can offset this by raising interest rates more slowly. Foreign central banks can do likewise.

Still, one worries, because the standard economic models are notoriously bad at capturing the macroeconomic effects of uncertainty, which trade wars create with a vengeance. Investment plans are made in advance, so it may take, say, a year for the impact of that uncertainty to materialize – as was the case in the United Kingdom following the 2016 Brexit referendum. Taxing intermediate inputs will hurt efficiency, while shifting resources away from dynamic high-tech sectors in favor of old-line manufacturing will depress productivity growth, with further negative implications for investment. And these are outcomes that the Fed cannot easily offset.

So, for those who observe that the economic and financial fallout from Trump’s trade war has been surprisingly small, the best response is: just wait.

Barry Eichengreen
BARRY EICHENGREEN
Writing for PS since 2003
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Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era.

龙血树

这位作者Eichengreen是学术与政策大牛。

他认为（美国）一年后才会看到不利作用，因为投资是提前决定的（即投资方面的影响将滞后显现）。目前数据没有显示不利影响原因还有：大家认为最终理性会回归，改弦更张。他不赞同，因为美国民间对贸易战持支持态度。特朗普以此反贸易言论上台，也需要对选民交代；大家可能相信特朗普所说很容易战胜中国；另外，就增税幅度和范围而言， 目前不大。

他认为，美国如果在关税影响下从高科技向传统制造业转型，会影响经济增长，而美联储的手段对此无能为力。

最后他对惊讶于后果如此之小的人士所说：等着瞧。

松叶牡丹

龙血树 发表于 2018-7-15 09:00
这位作者Eichengreen是学术与政策大牛。

他认为（美国）一年后才会看到不利作用，因为投资是提前决定的（ ...

所以说中期选举川皇可能还是大胜？OMG

五月

松叶牡丹 发表于 2018-7-15 12:51
所以说中期选举川皇可能还是大胜？OMG

中期选举还是要走着瞧啊。

虽然川总赢得了66%的共和党人的心，但是美帝选举的决定性因素从来不是共和党或者民主党人，而是中间派。

川总走的是邪教头目的路子。这种路子的好处是疗效特别快。坏处是来得快，去得也快。麦卡锡就是例子。
麦卡锡当年比川总牛多了，那时候老麦手指一下谁，谁就得准备坐电椅了。

邪教的特点是不能停，得不停地刺激受众。而且受众的阈值会越来越高，最后头目自己会爆炸。

看川总能撑多久，是一个很有意思地考察美国社会的角度。