It will happen. Note the beautiful bill does not cut corporate taxes as promised?
After the bond market sinks we will have to raise taxes. I just want people educated on how important this is.
Today’s lead editorial in the Wall Street Journal begs to differ:
Trump Has No China Trade StrategyWashington and Beijing stage a tactical retreat that shows China’s leverage.
President Trump on Wednesday hailed the result of the latest trade talks with China as a great victory, but the best we can say is that it’s a truce that tilts in China’s direction.
Details are few, but the countries appear to be resetting their trade relationship to where it was a few months ago before a t!t-for-tat escalation. Mr. Trump had agreed to reduce tariffs on China to 30% (55% including those he imposed during his first term) from 145% while China dropped its tariffs on U.S. goods to 10% from 125%.
But Beijing continued to leverage its stranglehold on rare-earth minerals …
While they don’t use the acronym in the editorial, the smell of TACOs seems to permeate the air.
Developing an alternative supply will take years and require cooperation with allies because the U.S. can’t produce and process all the rare earths it needs. Japan has pitched a rare-earths alliance as part of tariff negotiations, and the Administration would be wise to expand such a partnership with other allies.This gets to the larger problem with Mr. Trump’s tariff strategy—that is, he doesn’t have one. His latest walk-back shows he can’t bully China as he tried to do in his first term. China has leverage of its own.
A smarter trade strategy would be to work with allies as a united front to counter China’s predatory trade practices. Instead, Mr. Trump has used tariffs as an economic scatter-gun against friends as well as foes. This increases China’s leverage, and, like this week’s trade truce, that’s nothing to cheer about.
https://www.wsj.com/opinion/china-trade-talks-dona…
For the record, this is not an opinion piece by some writer they found, it is today’s lead editorial from the Journal’s Editorial Board.
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I doubt that. I think the press makes money spreading nonsense instead of analyzing the news.
Steel and aluminum tariffs but UK first with a possible deal won’t face those tariffs. That surrounds China if others agree.
Imports from China down something like 35%.
Insistence Apple leave China. Apple invests $55 billion in China every year.
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How game theory makes sense of the trade war between Trump and Xi : Planet Money How game theory makes sense of the trade war between Trump and Xi : Planet Money : NPR
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“On today’s show, we try to decide which of four possibilities might be the best model for this incredibly high-stakes game.”
So, without having to listen to the whole thing, which model did they like best?
DB2
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Interesting question. I do not read your articles either. Not sure I get accurate summaries from the OP.
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I often click through and read links, but I have a low tolerance for time-consuming podcasts and videos.
DB2
I mean there is a transcripts and like most podcasts audiobooks you cam listen to it on 2x speed without losing any comprehension, while you do chores or drive..
But essentially they think the us gov believes it is playing an ultimatum game
An ultimatum game is a really simple game. One player is called a proposer, and the other player is a responder. And the proposer has all the power.
For an optimum outcome in this game, the proposer does have to have all the power AND both parties have to buy in and believe that is the case. Otherwise both parties suffer suboptimal outcomes.
They think china believes it is playing a game of chicken or a game of attrition. So who will blink first. So normally theres a clear winner and loser. But it doesnt really apply here either bx chicken is a one shot game. Someone blinks or moves and theres a winner/loser… or both sides lose (head on collision). And the game is over.
Except here theres multiples rounds going back to trumps first term and tarriffs. So its closer to a game of attrition and one that china has been preparing for the last 6 years.
In attrition “The strategy here comes down to two big factors. The first is how valuable it is to you to come out ahead.” And how much youre willing to sacrafice to get there. Here china as an authoritarian state has some leverage on any democracy where if ppl are unhappy you can be unseated from power and policy changed. And indeed we have seen policy change quite a bit in this 2nd term.
In retrospect, it does seem like it was costing the US government a lot more politically to keep playing the war of attrition than it was costing the Chinese government.
ROMER: Which might have been part of the motivation for Treasury Secretary Scott Bessent hopping on a plane to Switzerland to negotiate that 90-day pause on the new tariffs.
SUN: I think the major watershed significance of this round is that the Chinese come to see that Trump is vulnerable. After the liberation day, how Trump has reacted to the volatility on the stock market, on the bond market, and to the US consumers, I think that certainly made the Chinese realize that, oh, he’s not-- he’s not invincible. He’s actually susceptible to domestic pressure. And I suspect that in the future, if there is going to be escalation or negotiation again, that the Chinese will exploit those vulnerabilities."
Finally they think its going to end up more or elss where it started before all of this
“The game economists turn to over and over again to model this is called the prisoner’s dilemma.
the prisoner’s dilemma, you have this-- this potential for win-win games.”
If you rat someone out, you go free they get life in jail. Unless they also rat you out, then you both get life in jail. Or you can both keep your mouth shut and both get 5 years in jail. You have no idea what the other person decided.
“In the classic prisoner’s dilemma, it’s pure strategy. It’s nobody cooperates with each other. Everybody steps on everybody else’s toes.”
But with repetition, which is whats happening with multiple rounds od tarriffs and negotiations and with multiple countries (players) there is memory and learning involved. Everyone gets hosed by someone else and eventually ppl learn not to rat each other out, so we all get a positive outcome, albiet not the BEST personal outcome where you are the clear winner.
And thats more or less whats gonna happen with trade wars.
When you move to a repeated game structure, then you’ve got a threat, right, which is, not only will I not cooperate with you today, I will not cooperate with you forever. You do something nasty and act in your naked self-interest at my expense, I’m going to punish you for the rest of all time.
[END PLAYBACK]
ARONCZYK: But if one of us acted like a good person who is friends with the other person and then the other, meaner person followed that good person’s lead, both of them would be better off than if we just kept doing mean-spirited things back and forth, Keith."
So again, prisoners dilemma in the context of trade
"So you think about large countries, and, you know, there’s a win-win where we have low tariffs with each other and a lose-lose where we’re both putting high tariffs on each other.
I think that’s basically what they said in Switzerland is, this is kind of a lose-lose. Could we put these tariffs on pause while we find a better way to get to maybe not a win-win, but a lose-less, lose-less?"
So basically usa thought it was an ultimatum game where they held all the power. China felt it was a game of chicken or attrition and would not afford to lose politically and felt it could outlast the usa. When the participanta are playing different games it becomes near impossible to get an optimal outcome for anyone.
Now they are both realizing they are in a prisoners dilemma and trying to find a way to both lose less.
"
If on April 1, the Trump administration had said, so what we’re going to do, we’re going to threaten to raise tariffs really, really high, and actually, we’re going to do it. We’re going to make those tariffs crazy high against China. And then they’re going to hit us back with their crazy high tariffs. And then bond markets are going to lose their minds and do some pretty scary stuff. And then we’re going to lower the tariffs against everybody else, and then we’re going to lower the tariffs against China, bringing us back to where we started. That seems-- that seems like a thing that if you had perfect foresight, you wouldn’t do at all to begin with.
Emily has a few theories. Theory one, maybe the administration really did think it was playing an ultimatum game and eventually figured out that, no, it didn’t, in fact, have all the power. Or theory two, maybe the US did think they were playing a prisoner’s dilemma, but they just underestimated what the penalties were for starting a trade war with China.
Maybe you don’t really know what the costs of an action are for you. So you’ve got to guess, I think tariffs would be actually not that bad for us. And then you impose tariffs, and you get a whole bunch of phone calls from American companies saying, these are terrible."
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IMO, the WSJ bias is toward Wall Street, the JCs, n the “status quo” that maintains Wall Street.
IMO, Wall Street don’t like the tariffs, and WSJ is working to undermine Trump’s agenda.
The US consumer market is larger than any other in the world. If a country can export its products to the US market, that country has a strong chance of “success”. If a country cannot access the US market, that country becomes less economically viable and fades into “developing nation” status.
The US (Trump) controls access to the US consumer market.
That is THE card that the US (Trump) holds and that Trump is playing.
China has “supply chain” and “cheap manufacturing” cards. China’s hold on these is/was almost monopolistic.
China’s success DEPENDS on export to consumer markets.
China’s TAM is global, and with ruthless, state supported manufacturing over-capacity, has pretty much filled that TAM. All the major consumer markets have a glut of Chinese product.
If China loses access to the US consumer market, China’s economic development and it’s national strength will be greatly weakened.
Those monopolistic China strengths have been decreasing for at least a decade, as China wages rose, and other countries (ex: Vietnam, India) began to develop manufacturing.
Trump’s chaos has fractured both of those China monopolies, allowing competitors to see an opportunity to take market share from China.
Trade agreements will determine who steps in to take advantage of the opportunities.
Back to WSJ. Pundits criticize the JCs n Ls n Ss who’ve “paid” homage to Trump.
But keep in mind that WSJ bends it’s knee to many of those same JCs n L&Ss.
ralph
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Great stuff
The true battle is over steel and aluminum. Heavy industry. Only a few places can create economies of scale, the US, China, and EU. To a degree Japan, UK, Australia, and India.
The US is working to gain demand side economics in other words a wealthier country bent on heavy industry.
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