Comment by runako
7 days ago
> If they fold and remove tariffs on the US
The issue with this is the "reciprocal" tariffs that were announced are not related in any way to tariffs imposed by other nations. According to the administration, they set the tariff rate for each country as (trade deficit / (imports * 2)). Obviously the country in question cannot undo this even by zeroing all tariffs with the US, because none of this is based on tariff rates.
It's not really only about tariffs. It's about the net effect on all barriers of trade, such as currency manipulation, subsidies, regulations, etc. The formula (trade deficit / (imports * 2)) means that countries actually have to address the root of the problem and prove it before the US reduces their tariffs.
Having a trade surplus doesn’t mean you’re cheating.
If I make products better/cheaper than you, I’m going to sell more to you than you are to me.
Ditto if I have some valuable resource you need that represents a large share of my economy. The fact that you need my germanium more than I do doesn’t mean I’m ripping you off.
I agree that a deficit could be healthy and fine and doesn't mean that the other country is cheating. The problem is how some countries have ruined it for everyone else by exploiting the current system. For example, after the first round of Trump tariffs, Chinese companies began moving factories to Mexico in order to take advantage of USMCA.
A thought experiment. Imagine a small poor country far from the US, of 1 million people, where the average income is $3000 annually ($3 billion total household income). Imagine a factory in that country that produces shoes beloved in America.
Those shoes are so popular in America that Americans buy $1 billion of those shoes every year. In order to address the problem as stated, this hypothetical country would have to spend a third of its household income purchasing products produced in some of the highest-cost conditions in the world. To do so, they would have to shut out their local trading partners from whom they currently buy goods at prices they can afford. This would have the effect of making them even poorer.
Does this make any sense?
If you make an exception for this hypothetical country, then countries such as China would come in and build factories there and bypass their own tariffs. You're back to playing whack-a-mole.
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