Absurditopians and Stupidians obviously wrote Don Boudreaux’s column “What if real wars were fought like trade wars?” My 16, TribLIVE); nothing else explains its lack of economic reality.
When a tariff is imposed, it’s not just to collect the tariff; since demand is elastic — that is, in proportion to price — one of two things will happen. Either the exporter subject to tariff will lower its price, to compete in the market with domestic goods, lowering its profits, or it will ship fewer goods, because buyers will opt for the lower-priced domestic goods. In the former case, the exporter is harmed, and the importing government accrues the tariffs; in the latter, domestic suppliers see more demand, increasing their profits and changing buying habits, so more of the money circulates within the domestic economy.
The same happens on the other side with retaliatory tariffs — but when one country exports much more than the other, that country suffers more. That is the case with China and the U.S. China exports a half-trillion dollars in goods to the US — 18% of their exports; the U.S., a quarter of that to China — .6% of our GDP.
Who’ll blink first? Who has the most to lose? To gain? Absurd? Right!
George Steele
Penn Hills