Under what conditions does “Trade Is war but by another means” make sense?

That’s a comment made by an Econbrowser reader. Initially, I thought this was the stupidest thing that had been written since Don Luskin decried recession doomsayers in September of 2008. Upon reflection, I still think it’s pretty stupid, but the statement could be better re-written as “Trade can be war by other means.”

Why does the Trade as war metaphor not make sense? It’s important to say, trade when conducted under non-coercive means, benefits both sides, or at a minimum, in the aggregate does not make any country worse off, relative to autarky. Certain groups within each country can be made worse off, and if one uses some exotic social welfare metric (weight producers 99%, consumers 1%), a country might be made worse off. But excluding those possibilities, trade as war doesn’t make sense.

Do some countries gain more than others from free trade relative to autarky? Sure, it’s possible that one country gets 75% of total gain, and another gets 25%. They’re both better off.

Do some countries lose over time relative to some pre-shock level? Sure, if you’re a natural rubber producer and there’s a discovery of how to make synthetic rubber, you lose relative to pre-discovery, but not lose relative to autarky.

Can a country gain by imposing a tariff on a imports if it’s a large country. For instance, in principle, China could gain by imposing tariffs on US soybeans if China is a large purchaser or soybeans. That is because it forces US producers to sell at a lower price than it would otherwise, i.e., it causes a terms of trade gain. There is a tariff rate that maximizes this gain assuming no retaliation. It’s called an “optimal tariff”. Of course, if the other (large) country retaliates, well, it’s likely both countries are facing higher costs, and maybe not necessarily much improved terms of trade…

Can trade be used to maximize national power? That’s a different question, and the answer is yes. But even here, Mr. Trump’s policies are out and out stoopid.

Over 70 years ago, A.O. Hirschman wrote National Power and the Structure of Foreign Trade, in which he outlined two main effects of trade in affecting national power (as opposed to welfare). The first is the “supply effect”, the second the “influence effect”.

The supply effect is fairly obvious — you want to make your country resilient to supply interruptions. One key way is to make sure you are sourcing heavily from reliable allies. In my view, Canada and the EU countries are reliable allies — but Mr. Trump is hurriedly alienating them, while cozying up to Russia, hardly a reliable supplier.

The influence effect is more subtle. It makes potential adversaries dependent on trade. Well, the US had made China quite dependent, in a manner not quite perceived by the Chinese, by selling semiconductors etc. to Chinese assembler/manufacturer ZTE. China is dependent on feedgrains like soybeans. In applying tariffs, the US alerts the Chinese to their dependence, and forces their hand to develop their own indigenous supplies, and/or increase their trade with higher cost producers.

So, yes, trade could be used a weapon in international rivalries. But if this is the intent (and I don’t think we should be thinking in this vein with respect to Canada or the UK or France or Japan or South Korea…), the Trump administration is pursuing this objective in just about the most counterproductive fashion possible.

57 thoughts on “Under what conditions does “Trade Is war but by another means” make sense?

  1. pgl

    I gave up on that particular discussion. CoRev is all over the map sort of like a carnival barker. First the trade war will be short lived and now it is going to be a never ending war. And all I did was to ask CoRev to mark his assumptions to what is happening in the market place.

    No more. CoRev ceased to what a civil discussion of the economic issues. He is even worse than the Trump twitter machine. Of course his sole mission in life seems to be defending Trump’s incredible insanity.

  2. pgl

    “the Trump administration is pursuing this objective in just about the most counterproductive fashion possible.”

    Of course you are assuming that Team Trump wants to pursue objectives in the interest of the nation. If one on the other hand assumes Team Trump is trying to set up possibilities to game the U.S. via insider trader, it all makes perfect sense.

    Let’s give up the pretense. Team Trump’s intent is to line its own pockets at the expense of the rest of the nation.

    1. Menzie Chinn Post author

      pgl: I don’t rule it out. But it’s also possible they just want to “bust things up”, with no idea how to construct something better.

      1. Moses Herzog

        Here’s an example of Professor Chinn giving the Orange Excrement the benefit of the doubt, which Orange Excrement hasn’t earned (not a criticism of Menzie on my part). Professor Chinn goes above and beyond the call of being objective, yet still has to take “friendly fire” from commenters on this blog who would french kiss Satan if he wore a three-piece suit colored as the American flag and held a Bible in his left hand.

  3. pgl

    France beat Belgium. So much for my prediction for yesterday’s game. Now it is Crotia v. England. Who knows?

    But we know this – no one in London is watching their stupid tennis tournament as every red blooded Englishman is in the pubs watching the World Cup!

    1. Moses Herzog

      I was finishing some shopping at a Wal-Mart in a major Northeastern city in China in 2002. I’m here to tell you, they were packed around a large screen TV, and if that ball came within 20 yards of the goal bars they went absolutely freak bonkers nuts. Even if you have “no skin in the game” there is something exhilarating about seeing people so into a sporting event, and their hopes fired up. But what you find, beyond that, is when your closer friends’ hearts are rapped up in their team, your heart as well becomes ensnared in the net, and they become “your team” also.

  4. CoRev

    Menzie what a confused article. For instance it starts with this thought: “Under what conditions does “Trade Is war but by another means” make sense?
    That’s a comment made by Econbrowser reader. Initially, I thought this was the stupidest thing that had been writtensince…” and ends with:
    “So, yes, trade could be used (as sic )a weapon in international rivalries…” then falling into another TDS rant. So your position is No, Yes, Maybe?

    Initially I thought this was the most naive thing that Menzie had written. After reading and thinking about his position, it hasn’t gotten any better. It’s still horribly naive.

    After claiming Trump is getting us into a “Trade War” Menzie in his many articles re: international trade, trade barriers, he has not recognized the reality that we have been in such a war for a generation and longer. Only recently has China emerged as the #1 antagonist, but others have been Japan, OPEC, the EC/EU, Russia and the Eastern Block, etc. I’m sure if you think several more antagonists can be added. And, yes, some of these actually evolved into shooting wars.

    Well, not everyone—not the American worker who is displaced by exports, or the French film maker protected from competition by l’exception culturelle, or Europe’s farmers who can’t compete with America’s more efficient ones, or German manufacturers of solar panels who probably won’t survive even if the EU does slap a 68 percent tariff on Chinese imports. In short, the decision to extend free trade has losers as well as winners,…”
    And, it ends with this: “Trade is more than an exchange of goods and services. It is politics, and war, by other means.”
    There are so many examples where trade is used as a weapon to gain advantage, one country over the other, that it is mind boggling to see “autarky” used as the baseline for comparison.

    This 2013 prescient article talks about the situation with many of the same countries Menzie considers (political) allies, but ignores their actions against us in trade.
    https://www.weeklystandard.com/irwin-m-stelzer/trade-war-by-other-means
    It begins with this: “Trade makes the cake bigger so everyone can benefit.” So advised our distinguished visitor, British prime minister David Cameron, on the op-ed pages of the Wall Street Journal. I present this article as evidence that things have changed little, and in fact have gotten worse with some US trade antagonists, and better with others.

    Ignoring the definition for a shooting war, War has many other forms:
    “a : a state of hostility, conflict, or antagonism
    b : a struggle or competition between opposing forces or for a particular end
    a trade war (My add for adding context) If you disagree explain all the articles’ references)
    a class war
    a war against disease
    c : variance, odds”

    So what is your answer? Does “Trade Is war but by another means” make sense? How far does trade competition have to be pushed to be called a war?

    1. Menzie Chinn Post author

      CoRev: Let’s take your example. During the 1960s-1990’s, I’d guess you would say the US was in a trade war with Japan. Did the US gain from trade with Japan? I’d say yes, in terms of cheaper goods (because of comparative advantage) and of competitive pressure that forced quality gains in American products (say cars), and increase in variety and lower costs (in a monopolistic competition model of trade in differentiated goods). Did Japan gain? Yes, from greater demand for goods, selling products it had comparative advantage in. That’s a war?

      1. CoRev

        Menzie, “During the 1960s-1990’s, I’d guess you would say the US was in a trade war with Japan.” Are you now kidding me, again? NO! Can you not think of a better period when we were at a trade war with Japan?

        1. Menzie Chinn Post author

          CoRev: No, please elaborate. Most people in the current world would agree with me. “Japan as Number One” was published in 1979. Do you want to go back to 1940, and the oil embargo? That was a pretty short period. And I’d say the causality went the other way — the Imperial Japanese Navy was worried about sufficient supplies of oil which lead to plans to secure the Southern Resource Area.

          So, if you are including “sanctions” (i.e., the absence of trade) as part of international trade, well, then *absence of* trade is war by other means.

          1. CoRev

            Wow! Menzie, stop digging. That hole is about to collapse onto you. For all I wrote showing the weakness of your argument you picked one country and one period, 60s -90s, then added the 30s when trade sanctions resulted in a trade war with Japan. We all knew what eventuated.

            So we now have another term, trade sanctions, to go with autarky, and Menzie still will not admit that trade wars are fairly common.

            But in Menzies perfect world of international trade, ” It’s important to say, trade when conducted under non-coercive means, benefits both sides, or at a minimum, in the aggregate does not make any country worse off, relative to autarky.” Let me highlight his comparative world(s) trade when conducted under non-coercive means, and autarky, which one definition called: “…autarchy is a Utopian dream”.

            So Menzie wants us to compare a near perfect or self sufficient world of trade to today’s version of China. Any one see any problems with that? China is neither, and except for the China apologists commenting, is far closer to a country implementing unfair trade practices, and some might consider China’s practices putting them already in a trade war.

            So does “Trade Is war but by another means” make sense with China? Some would say yes.

          2. Menzie Chinn Post author

            CoRev: By non-coercive means, I meant (1) Britain’s empire in e.g., India, (2) Or the “unequal treaties” between China and the West, and other cases of gunboat diplomacy. But I’m sure you’ve never thought about those cases, or viewed them as “good things”, given your Weltanschauung.

          3. CoRev

            Menzie, stop digging! “By non-coercive means, I meant (1) Britain’s empire in e.g., India,” now you’ve shifted from international trade to empire building and gun boat diplomacy. Why not add the stamp act and the American Revolution.

            You might have partially redeemed yourself by defining a threshold of coercive trade practices for being in a trade war, but you chose an illogical comparison, autarky. That alone questions your judgement of what and when we may be in a trade war.

            But I do think the your idea of trade as war is not commonplace, is totally unsupported.

          4. Menzie Chinn Post author

            CoRev: If you don’t understand the difference between (1) Country A and Country B agreeing to trade w/o the threat of one invading the other, and (2) Country A occupying parts of Country B, and insisting Country B allow the importation of, let’s say, heroin, I cannot help you. I do not think the majority of trade economists can help you.

            Signed,
            An economist who has been teaching international trade for nearly 30 years.

          5. CoRev

            Menzie, not once have you defined what and when a “trade war” can be declared. He has provided 7 examples to date from an urban legend to full on invasion, but will not or can not define the threshold for declaration. Yet, writing belittling articles without defining the term(s) and is what we see from “An economist who has been teaching international trade for nearly 30 years.”

            If you cannot define the threshold, then how can you write a belittling article, and moreover belittle another’s writer’s article quoting a national leader?

            RTD would be proud of your latest hypocrisy.

          6. baffling

            i can imagine having this conversation for menzie is like talking to a drunk timothy trybus. corev is going to argue about anything and everything rather than admit to being wrong and learning. what an idiot.

        2. noneconomist

          CoRev: for some time now you’ve assumed the role of the half blind batter arguing balls and strikes with the home plate umpire.
          You’re better off just admitting, “That one sounded low.”

    2. pgl

      The master of confusion accuses our host of being confused? Hey CoRev – ever heard of the expression, “when in a deep hole, stop digging”?

      1. CoRev

        Hey, pgl, never able or willing to answer a challenging question, maybe you can define when and what conditions define a “trade war”.

  5. Bruce Hall

    Menzie, I don’t find technical faults with your post, but there may be one area that we see things differently: “One key way is to make sure you are sourcing heavily from reliable allies. In my view, Canada and the EU countries are reliable allies — but Mr. Trump is hurriedly alienating them, while cozying up to Russia, hardly a reliable supplier.”

    I find that in conflict with Trump’s actions regarding NATO. His statements to Germany regarding an energy tie-in to Russia and to the effect that Russia owns Germany is hardly “cozying up” to Russia on the economic front. He may be reluctant to admit a linkage to Russia in the 2016 campaign (and, indeed, any links are rather oblique at this time), but that is not “cozying up” either. Trump’s administration has made it clear that it directly opposes Russian advancement in the Middle East, especially Turkey and any Turkish purchase of weapon systems from Russia. Yes, Trump did oppose more sanctions against Russia, but that’s not the same as rescinding sanctions… and Trump eventually did sign a bill for more sanctions against Russia.

    There may be many things askew with Trump’s economic foreign policy, but “cozying up” to Russia isn’t one of them. So, how is Trump “cozying up” to Russia? Or is that just a trigger phrase for progressives?

    1. Menzie Chinn Post author

      Bruce Hall: What about failing to implement the sanctions required by Congress? (And we know from accounts that one of the first things Trump asked when getting into office was how to relax existing sanctions; after all, that was the topic of the June 2016 Trump Tower meeting). Relegating Crimea to Russia? Why is Trump in a hurry to take our troops out of Syria? Why isn’t Trump criticizing Russia for interference in the 2016 elections, despite the conclusions of the US intelligence agencies?

      And given provocative actions by Russian air forces in the Baltics, I’d be doing a lot more to reinforce our position there, perhaps by expanding the scope of joint military exercises (not wargames).

      1. Bruce Hall

        Menzie, I didn’t realize you had become such a military hawk. But isn’t some of that supposed to fall on NATO? Or the UN?

        You have to ask yourself: why did Obama send U.S. troops to Syria while he was sending arms and money to “opposition” groups that ultimately armed and funded ISIS? Furthermore, what did a few hundred U.S. troops actually accomplish since it really wasn’t much of a military force to begin with. Personally, I’d like to see the U.S. pretty much out of the Muddle East and let a fairly wealthy EU (GDP is about that of the U.S. http://www.businessinsider.com/charts-eu-economy-is-bigger-than-the-us-2015-6) start protecting itself. Israel and Saudi Arabia are an effective deterrent against Syria and Iran while the EU can get off the free defense ride and use some of its profligate social spending on its defense.

        I’d rather see U.S. resources and military address the Latin American corruption and violence that sends millions over our borders illegally. No more bandaids on bullet holes.

        1. Menzie Chinn Post author

          Bruce Hall: Actually, have been my whole life. Nothing like knowing a lot about what the Communist forces did in China to make you so. And nothing like knowing a little history (from Shirer’s Rise and Fall of the Third Reich to the Nanking Massacre) to make you believe that a strong — but sensibly designed — defense is advisable.

          I’m with you on redeploying, although my focus would be on East Asia. We should be balancing the growing politico-military hegemony in Asia-Pacific by China, by economic (TPP), political (ASEAN) and military means.

          1. Bruce Hall

            Menzie, you continue to surprise me.

            One question: is the U.S. trade (co-dependence?) with China a double-edged sword for the U.S.? It would seem that China is accumulating wealth for the state on the backs of its workers and environment and directing an increasing amount of that wealth to build a formidable military to challenge the U.S./Korean/Japanese/Taiwanese alliance (the growing politico-military hegemony in Asia-Pacific by China.).

            Your comment seemed to indicate you believed the U.S. could migrate from its current trade status with China to other eastern Asian nations. It would seem that unless those other eastern Asian nations formed their own version of the EU and NATO with formal treaties with the U.S., that China will soon be free to roam wherever and whenever it wants. China has already begun the process of driving out other nations from any claim of their own in the China Sea or a claim of international waters.

            I agree that communist China represents a long-term threat to the entire region, but I’m not sure its neighbors are anxious to challenge it. And it seems unreasonable that the U.S. can continue its European and Middle East strategies with an ever-expanding role in the Pacific. Perhaps it is time for the U.S. to rely more on military technology transfer to our East Asian allies and less on our own hardware and personnel presence. China has done a masterful job of that with its proxy, North Korea. I suspect, however, that the biggest threat from China will come from their presence in space over the next two decades.

            So, when do we bite the financial bullet by winding down trade with China and make it difficult for China to bankroll its growing military? That might make tariffs seem positively tame. Or is it too late and we will someday recognize President Nixon’s folly.

            Meanwhile, economically, socially, and politically, we continue to ignore the problems that Latin America poses.

          2. Menzie Chinn Post author

            Bruce Hall: China acquires over $2 trn Treasury and Agency debt, and you complain? They finance our deficits (increasing post-TCJA) and do so in a way that means a given Treasury bond loses value over time as their currency appreciates. If we cut trade, we suffer higher prices (primarily for those goods purchased by lower income households, so I am sorry for that), they suffer a drop in aggregate demand. I’ll take that.

            I don’t want the Chinese to own critical industries and associated technologies. That’s why a more robust CFIUS process is something that everybody should support. On the other hand, bogus Section 232 sanctions will (1) reduce our credibility in international fora when we need support, and (2) hurt our allies more than our strategic competitors like China, given that we have already imposed a slew of anti-dumping and countervailing duties on China.

            For imposing maximal economic pain on China, and hence having maximal leverage, I would’ve gone through with the ZTE sanctions in full. But Trump gave up that lever without a whimper.

            You want to degrade China’s ability to achieve the Made in China 2025 objectives, you work on the intellectual property/high technology frontier. You don’t apply tariffs on Chinese antiques.

          3. Bruce Hall

            Menzie,

            The U.S. essentially built modern China through technology transfers and using them as a source of cheap labor. That could have happened in India, but Nixon thought he could turn China into some kind of trading partner friend. To undo the web in which we’re tangled with China, we would have to find or develop alternative sources to undercut the communist government in China. Not an easy task now that they have achieved technological independency in so many fields. They can simply undercut our exports and markets.

            https://techcrunch.com/2018/05/07/china-chip-fund/
            https://journalistsresource.org/studies/international/china/china-rising-science-technology-research-contributions
            https://www.bloomberg.com/graphics/2016-asia-space-race/china.html
            https://www.nytimes.com/2017/06/05/business/energy-environment/china-clean-energy-coal-pollution.html
            https://www.nytimes.com/2018/06/10/technology/china-technology-zte-sputnik-moment.html

            We’ve created a monster and it’s trying to devour us. They may not be quite there, but they are getting ready to change the rules of the game.

          4. CoRev

            Bruce, I will predict that no one will respond to your: ” We’ve created a monster and it’s trying to devour us. They may not be quite there, but they are getting ready to change the rules of the game.”

            Any negative response will be interesting.

          5. baffling

            bruce, if you are so against china, why not also fault the tech companies who handed over their technologies? an example of stupidity in the “real world”.

            if the current system is set up to benefit the us and keep the rest of the world at bay, what incentive do those countries have in following “your rules” and always staying in second place? you think bill belichick wins titles by following the rules which benefit others over him? people like you and peak loser continue to lament how china does not behave the way they want. as some of you like to say, its all about the incentives. if china can find a path forward which is faster and more efficient, why should they follow your inefficient path? peakloser is a perfect example of somebody who ignored the rules to get ahead, when he helped to tank the financial markets a decade ago.

          6. CoRev

            Bruce, I stand corrected. Baffled provided one of the most muddled comments blaming US companies for buckling to unfair Chinese demands for the opportunity to do business in China. Another example of liberal stupidity in the “real world”. Why do they so hate American business and sometimes the US?

          7. ilsm

            Menzie,

            Have you fully bought in to the ubiquitous neocon propaganda selling perpetual war profiteering, as Gore Vidal observed?

            Today I see references to the “national interest” when I see that kind of hard sell. Whatever “national interest” has to do with empire and not “common defense”. While “national security” is somewhere between “common defense” and neocon war profiteering.

            “Relegating Crimea to Russia?” Is Crimea a Tatar [mix with Cossacks] populated region kluged to Ukraine (aka Ukluge) for administrative convenience by the Soviets? Short what is the ‘strategic issue’ of maintaining Ukluge as an integer?

            “Why is Trump in a hurry to take our troops out of Syria?” Idlib, next Syrian target since Daraa is liberated, is run by ISIS light. Because the only reason US is in that quagmire [legacy of Clinton-Kerry deep neocon roots] is to suck up to prince Mohamed bin Salman who is a major sponsor of Salafi terror. It’s like Syria has any connection to the US’ “common defense”.

            “Why isn’t Trump criticizing Russia for interference in the 2016 elections, despite the conclusions of the US intelligence agencies?” Do you trust those 17 different wire tapping spy agencies filled with “spooks”, do you know what they exist for? Is their ‘assessment’ any more than Orwellian “we are always at war with Iran”? The Russia thing is not more than excusing Hillary’s poor campaigning!

            “And given provocative actions by Russian air forces in the Baltics, I’d be doing a lot more to reinforce our position there, perhaps by expanding the scope of joint military exercises (not war games).” Well, here you have a point. Why don’t the US Navy steam a carrier battle group up to Sevastopol like they run them through the South China Sea to make China mad? Why don’t that Black Sea carrier battle group practice launching strike sorties like worked so well in Vietnam? I suggest that the ease with which old Soviet attack fighters buzzed the US Navy air defense ships is very worrying.

            My experience with war gaming and spending huge sums for maintaining [the first effect of the Reagan splurge was training and gaming, money went out faster than contracts useless super weapons] ‘combat readiness’ is the benefits are very short shelf life. While the enemy may not be so polite as fight the US in the manner you are training. See Vietnam and first 3 month in Korea 1950.

            China will tilt with the US as Sun Tzu advised, not in the interests of Lockheed Martin’s pentagon.

            Last question, do you suppose China would be better of under the Kuomintang and war lords’ oligarchy that lost to Mao?

          8. Menzie Chinn Post author

            ilsm: You’ve got a long set of questions. My first ever term paper was on the military industrial complex, so I’ve been suspicious of foreign entanglements continuously. On the other hand, re: Crimea, I seem to remember something about the “Sudetenland” was rightly part of Germany.

            Re: China, I tend to think there some chance China is better off with Mao (or at least it was inevitable that the Communists would win), although the millions dead in the wake of the Great Leap Forward and the Great Proletarian Cultural Revolution must surely give even the most committed true believer some pause for thought. Do you not agree?

          9. baffling

            so corev believes it is ok for us tech companies to submit IP secrets to china in order to make a few extra dollars. why would you defend business leaders who give away the store for free? pretty poor business practice if you ask me.

    2. pgl

      “His statements to Germany regarding an energy tie-in to Russia”

      This particular statement may be the dumbest thing Trump has ever said.

      1. Bruce Hall

        pgl
        “Russian gas made up more than 60 percent of Germany’s total imports for most of last year, according to data from Marex Spectron Group Ltd., and the country says its fuel is the most flexible and reliable.” https://www.bloomberg.com/news/articles/2018-07-11/trump-brings-grievances-to-nato-summit-worrying-u-s-allies

        Okay, no “tie-in” there.

        Add in 30% of Germany’s oil and a lot of coal from Russia and there is no “tie-in”. Nope, just ignore the man behind the curtain.

        Now, was there some hyperbole or exaggeration? Possibly… probably. But was his point incorrect? Hmmm. The “dumbest thing Trump has ever said”?

        You may have missed the whole point while you were picking nits. Trump was telling the EU to “man up” and not expect the U.S. to carry the lion’s share forever. Oh, “man up” is so sexist. Sorry.

        1. pgl

          Take a look at that interesting map. Whatever tie in is modest. But do cherry picked statistics if you wish. That is what Trump supporters excel at.

          1. Bruce Hall

            pgl, oh I did look at the map and the tie-in is not trivial. Are we looking at a different map?

        2. 2slugbaits

          Bruce Hall Trump was telling the EU to “man up” and not expect the U.S. to carry the lion’s share forever.

          If that’s what Trump really wanted, then it’s pretty hard to explain why Trump also wants to ramp up US defense spending. If you want to motivate NATO partners to spend more on defense, then our spending more hardly seems like an intelligent way to go about accomplishing that goal. If you want you teenage son to get a job, would you give him a bigger allowance? A more plausible explanation is that Trump wants the NATO partners to buy more US manufactured weapons; i.e., he’s looking for an export market. Do you really believe Trump would enthusiastically support our NATO partners spending more on defense if that increased spending went towards Fabrique Nationale Herstal or BAE Systems or Airbus Helicopters or Daussalt Aviation or Krauss-Maffei? I doubt it.

      2. CoRev

        Pgl,, what a dumb and naive statement. I bet you don’t even know what is the German and Russian energy tie-in.

        There’s another challenge for you to run away from.

        1. pgl

          “I bet you don’t even know what is the German and Russian energy tie-in.”

          Like you do? Lord – you really are a dumb troll. Not wasting time with you any more. But do babble on incoherently as it is what you do.

    3. 2slugbaits

      Bruce Hall I think it’s more likely that Trump was just looking for an excuse to trash talk NATO in general and Merkel in particular. The fact is that Trump has been slow walking the build-up of forward NATO supply support activities in the Baltics and Romania. Establishing that capability was one of the US Army’s top priorities during the late Obama years; however, almost as soon as he took office Trump put the breaks on. During the last two years of the Obama Administration the 173rd Airborne Brigade acted as the frontline and tripwire in the Baltic, with almost constant training exercises. In Sep 2017 the 173rd sounded the alarm, which Team Trump has since largely ignored: https://www.politico.eu/article/us-army-unprepared-to-deal-with-russia-in-europe/ Ever since Operation Saber Guardian (July 2017) the 173rd has been cooling its heels. Putin’s Poodle.

  6. baffling

    menzie, i think you are taking this trade war concept too far and giving corev too much credit. corev brought up the idea of trade war so that he could deflect commentary on his “ongoing negotiation” theme. he tried to differentiate the items after his arguments became increasingly incoherent. he did the same thing when free trade morphed into fair trade. corev is not talking trade wars, he is simple talking nonsense.

    1. Menzie Chinn Post author

      baffling: Agreed. But I do think the idea of trade as war is commonplace, and should be disposed of. You should read the Stelzer (Hudson Institute) piece he refers to for a laugh.

  7. 2slugbaits

    There is a tariff rate that maximizes this gain assuming no retaliation. It’s called an “optimal tariff”.

    Yes. And it’s typically a fairly small tariff and always less than the “revenue maximizing tariff”. But Trump wouldn’t know that.

  8. Dwight L. Cramer

    By and large, people who use the war analogy don’t have much combat experience. Doesn’t matter if we’re talking about a war on drugs, a trade war, a war on cancer. Or maybe some of them do, and they’re prattling at people who don’t.

    Anyhow, from ‘too proud to fight’ a century ago to wars on everything. Not sure this is progress. Of course , a bit over a century ago, Normal Angell wrote a best seller arguing that war between the Great Powers was impossible because it was economically unsustainable. Woo hoo, was he ever wrong. And, to the negative pregnant of this discussion, certainly the Empire of Japan, shortly before Pearl Harbor, took the position that refusal to trade, if not trade itself, was tantamount to war, when that refusal took the form of an oil embargo.

    Not that anyone much cares what a historian thinks, unless what he or she is saying is operating as confirmation bias. But, just as there are limits to the efficacy of military power, there are also limits to economic analysis.

    1. 2slugbaits

      Speaking of history, it might be a good idea for Team Trump to reread Thucydides’ account of the Delian League. It’s a good lesson in what can happen when a would be hegemon demands financial contributions from smaller states but wants to make all the decisions long after the original threat recedes.

  9. 2slugbaits

    CoRev You’ve treated us to a spasm of nonsense, which means some of us have to clean up your mess.

    Let me highlight his comparative world(s) trade when conducted under non-coercive means, and autarky, which one definition called: “…autarchy is a Utopian dream”.

    A lot to unpack, so let’s begin with “autarky”. In international economics the term “autarky” refers to an economy that is closed to external trade. In the real world very few if any countries are totally autarkic anymore than countries are entirely open to unfettered free trade. But the autarky model serves as a useful starting point to explain the welfare benefits that happen when a country opens itself up to international trade. Just about any decent international trade textbook should cover the basics in the first couple of chapters, so you shouldn’t have to read too many pages. Autarky is a fundamental concept in international economics. If you want to contribute to a post about international trade, then you should at least do the rest of us the courtesy of learning the basic terms. And autarky is only a “utopian dream” in the mind of someone completely ignorant of economics. For the rest of us it’s a dystopia

    So Menzie wants us to compare a near perfect or self sufficient world of trade to today’s version of China.

    Nowhere does international trade theory say that the benefits of free trade are conditional on a near perfect realization of free trade. In general the freer the trade the greater the benefits, but you can still enjoy significant benefits even if the trade is “unfair” and even if the other country imposes tariffs and you don’t. As a general rule, when a trading partner imposes tariffs the welfare costs of those tariffs fall on that country’s own consumers and not on the other country. And retaliation by the other country only makes both countries even worse off. Instead of calling all this a “trade war” I suggest that it would be closer to the truth to compare it to a suicide pact.

    1. baffling

      this is similar to the beatdown 2slugs gave corev a few days ago. must admit, the little critter seems to really like taking a beating, as he returns time and time again.

      1. CoRev

        Baffled, are you ever going to add value? Beat down? Read the whole series of comments.

        1. baffling

          i can’t believe the ref let the fight continue. he is going to get corev killed if he doesn’t stop this beatdown. corev is delirious now.

    2. CoRev

      2slugs, this is cleaning up: ” In the real world very few if any countries are totally autarkic anymore than countries are entirely open to unfettered free trade.”? And defining it as you have reinforces the concept of a utopian dream and further defined it a a text book concept not occurring in real world conditions.

      Another fascinating non-argument is: “Instead of calling all this a “trade war” I suggest that it would be closer to the truth to compare it to a suicide pact.”, because it is y’all who have called it a “trade war” or potentially so. We have called it a negotiation in order to move our trading partners, antagonists and allies, closer to more fair trade practices. It has been your TDS driven fear mongering that has created these misleading arguments.

      Please clean up your own back yards.

      1. 2slugbaits

        CoRev defining it as you have reinforces the concept of a utopian dream and further defined it a a text book concept not occurring in real world conditions.

        I have no idea what you’re trying to say here.

        it is y’all who have called it a “trade war” or potentially so.

        Obviously you missed the point.

        We have called it a negotiation in order to move our trading partners, antagonists and allies, closer to more fair trade practices.

        But yet PeakTrader just told us that negotiating was a waste of time. And as the Goldman-Sachs chart shows, Trump’s actions are moving us further away from where we want to be, not closer.

        It has been your TDS driven fear mongering that has created these misleading arguments.

        Well, the facts on the ground support my arguments. Since Trump was sworn in we have significantly more tariffs and trade barriers than we did the day before he took office. And what battles have been resolved have all gone China’s way; e.g., the ZTE settlement/bribe and the decision to take HDTVs off the US tariff list. The only “concessions” that China gave were some exclusive trademark privileges for Princess Ivanka’s products.

        1. CoRev

          2lugs, obviously you can not follow the logic and subjects of your own comments.
          Re: your definition of autarky- ” have no idea what you’re trying to say here.

          Re; who is calling current actions a Trade War “Obviously you missed the point.” Can you actually not tell us who has used the term?

          Re: being in trade negotiations: what Goldman-Sachs chart? and taking Peak out of context leaves me no idea what you’re trying to say here.

          You final summary is all opinion and no references. It is also representative of TDS driven drivel.

          1. 2slugbaits

            CoRev I still have no idea what you’re trying to say about the definition of autarky. I thought I explained it to you. Autarky refers to an economy that is closed to international trade. What part of that do you not understand? It doesn’t have a damn thing to do with “utopia” unless you’re idea of utopia is shutting yourself up in a Montana cabin.

            As to “trade war”, plenty of people are calling it a trade war. You yourself referred said “trade is war but by another means.” When economists refer to a trade war they generally mean an escalating tit-for-tat in trade barriers. The main difference is that you seem to approve of using trade as a tool to undermine political rivals. Economists see trade wars as something to be avoided. You seem to believe trade wars are a zero sum game and one side will come out ahead of the other. Economists see trade wars as suicide pacts that leave both sides worse off. How difficult is that to understand?

            Re: being in trade negotiations: what Goldman-Sachs chart?

            This one: http://econbrowser.com/archives/2018/07/its-time-the-taxes-of-august

            Does it look familiar, or is Alzheimer catching up with you?

            taking Peak out of context leaves me no idea what you’re trying to say here.

            I didn’t take him out of context, I simply pointed out that he didn’t seem to realize he was contradicting himself and not fully thinking through what he wrote. Maybe dementia is an epidemic among aging Trump supporters.

            You final summary is all opinion and no references.

            Yes, it must be Alzheimer’s. How else to explain your not being aware of Trump’s decision to cave on ZTE a few hours after getting $500M in “investment” monies from the Chinese for a Trump property in Indonesia? How else to explain your apparent ignorance that Trump relaxed some trade restrictions a few hours after Ivanka was awarded seven trademark rights that she had been seeking for quite a while and also denying trademark rights for Ivanka’s competitors who also petitioned the Chinese? Are you that uninformed that you didn’t know about these things? Or are you just that senile? Steady diet of Fox Noise?

          2. CoRev

            2slugs,maybe if you repeat it enough times it will break through your TDS driven filter so that memories of what you already wrote about autarky can be accepted.

  10. KC

    Hi, perhaps the US economic embargo against Cuba (and now Iran) and the French embargo against Haiti (following that nation’s independence) are examples of war by trade?

    Like a trade war, a real war is almost invariably costly to the aggressor, even against relatively weak opponents.

  11. CoRev

    Hi everyone! I just thought I would let you know that RTD’s claim that some comments are magically disappearing.

    RTD would be proud of the current example of objectivity.

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