Wednesday, August 01, 2018

Trade between US and Europe based on the theory of comparative advantage could be the reason why America is applying tariffs on imports from China

  • America desperately wants to "contain" China, just like it wanted to contain the Soviet Union, and just like it keeps trying to contain Russia, Iran and others.
  • Containing China isn't easy at all, primarily due to China's vast size and fast growth.
  • America knows that it needs Europe's help to contain China.
  • What if US and Europe joined forces in this pursuit, freely trading with each other [add America's vassal states, or so-called "allies" to the mix - Australia, New Zealand, Canada, UK, Japan, South Korea, and others], but excluding their adversaries/rivals [China, Cuba, Iran, Libya, North Korea, Russia, Sudan, Syria, Venezuela] from this free trade, thus creating huge mutual benefits for the gang as predicted by the comparative advantage theory [naturally at the cost of China and others]. America tells Europe - let us both drop all sorts of tariffs on each other's products and buy from and sell to each other and only each other [especially the buy from part, naturally]. Let us both impose tariffs on imports from China, so that China's exports are severely curtailed [by the way, these so-called tariffs are nothing but a form of sanctions cloaked under a different term that doesn't sound like "sanctions"]. What's more, not only are China's exports going to get hurt, foreign companies manufacturing goods in China both for the local market as well as for global export might want to shift elsewhere, thus hurting China even more.
  • Comparative advantage states that even if an absolute advantage exists for a particular country, the overall benefit and prosperity for everyone increases if this superior country focuses on producing only certain goods and lets the other(s) produce the other goods [and free trade takes place]. So, to stop China's exports/trade - which produces wealth and prosperity for China - it appears that America and Europe are banding together.
  • It's possible that imposing tariffs on both European and Chinese goods was just a calculated stunt by America. Maybe this was discussed with the Europeans. The Americans wanted to make it look like Donald "Madman" Trump is imposing tariffs on every country, but in reality, they were always going to remove tariffs on Europe, thus leaving the tariffs on only China, without giving the appearance ["optics"] that the tariffs were always only for China.

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