or, Mr. Trump is a wimp
President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!
— Donald J. Trump (@realDonaldTrump) May 13, 2018
In this post I showed the negative impact on some US allies from tariffs on Chinese exports to the US, highlighting the importance of distinguishing between gross value and value added. Here is another graphical depiction of how tariffs on Chinese exports to the US are — in part — tariffs on US value added…
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. This is an extended version of a column that appeared at Project Syndicate on April 17th.
From The Hill:
President Trump on Thursday instructed top administration officials to explore re-entering the Trans-Pacific Partnership (TPP) — a trade pact he pulled the U.S. out of last year while calling it a “disaster.”
With this whipsaw of trade policy announcements, is it any wonder that economic policy uncertainty is rising? As measured by the Baker, Bloom and Davis index:
Figure 1: Daily EPU index as of April 12 (blue), and 7 day centered moving average (bold red). Source: policyuncertainty.com, and author’s calculations.
A longer term perspective on economic policy uncertainty is shown in this post.
And of course, most of us knew it wasn’t so horrible at all, back when we had a chance to influence the nature of TPP.
Update, 8:15PM Pacific 4/13: Reader Ed Hanson asserts that EPU is rising for most countries. I plot below the monthly indices; I honestly don’t see what he’s claiming.
Figure 2: Monthly EPU indices. Source: policyuncertainty.com.
I’ve seen the argument that China’s tariffs on soybeans will have no effect because the soybeans will be relabeled so that US soybeans go to Europe, and soybeans that previously went to Europe go to China, evading Chinese tariffs on US soybeans. John Cochrane makes this point. This seems to have surface appeal in a world where transport costs are zero, and there are no set-up costs to establishing new trading links. Still, I sensed that this conclusion must rest on some assumptions, including for instance infinitely elastic supply. I decided to investigate further.
From Bloomberg:
In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs.
Reader Bruce Hall, opining on the impact of mooted Chinese tariffs on US hog and soybean exports.
As with pork, it looks as if the cost of food is going down for Americans as the Chinese bury their citizens in food price increases.
Source: ino.com.
