Monday, March 19, 2018

Our last trade war

Trade war!
I have been thinking over the commentaries I'm seeing about Trump's coming trade war and I am not impressed.

Trade wars are a bad thing, usually, but some of the predictions I have been reading do not match very well with our trade war with Japan.

Trump, for example, thinks that once we get the barriers up and the factories restarted foreigners will rush to buy American products. And some of the anti-Trumps think that a weaker dollar will increase our exports by making them cheaper to foreigners.

That isn't what happened between America and Japan. The yen went in a fairly short period from 360 to 120 to the dollar, and over a somewhat longer period to about 90. That is, the dollar weakened by a factor of 3 to 1 and eventually 4 to 1.
Did the Japanese start buying Fords? No. Why would a savvy Japanese consumer buy a crappy Ford when he could buy a reliable Toyota?

The trade war with Japan was fought with blunt instruments. Oranges, for example. The Japanese raised a tariff wall against American oranges in order to protect their growers of mandarins. This despite the fact that a navel orange and a mandarin orange are not really equivalent products.

The American orange growers thought that their troubles would be solved if they could just unload their oranges on the Japanese. Meanwhile they forgot to look after business and American groves are now in a bad way from citrus greening, disinvestment, anti-immigrant policies and the usual bad management that we associate with virtually all American businesses.

The United States can no longer supply our own demand, much less export, and we are now dependent on Brazil for our juice.

Back in the previous trade war,  the one with Germany, West Germany at that time, we thought  we could solve our chicken problem by selling cheap chickens to the Germans. The Germans did not particularly want cheap chickens, and we retaliated with a big tariff against German vans. American consumers did not then buy American vans. What savvy American consumer would by a crappy Chevy van when he could buy a good Volkswagen van?

I speak from experience. i bought my first Volkswagen van in 1970 at the height of the trade war and later on three more Volkswagen vans. It never crossed my mind to buy an American one. You would've had to pay me to take Detroit iron.

As I write this as I write this the rumor mill says Trump is going to impose $60 billion in tariffs on Chinese goods. That is a trivial amount compared to overall US-China exchanges. I do not know what is going to happen but I expect it will be bad for everyone, or just about everyone.

As Texas Guinan used to say to the big  butter and egg men, "Hiya, suckers!"


  1. It turns out he left Brazil, among other, out of the tax increase - which probably made orange juice producers in Florida sad.

  2. The bottlers depend on Brazil. The growers can sell all they have. Disease is their biggest worry. And labor in the orchards.

    On tariffs, China's retaliation has been so feeble (so far) as to be almost invisible. Wall Street calmed down over night.

    Like you said, theater

  3. They will wait and see if a next US president changes policy again. If they reciprocate the animosity, they make it harder for the US to walk it back.

    Meanwhile, US consumers will probably shoulder a good part of those taxes. It is only fair, you get what you vote for.

  4. More worrying is the ad hoc destruction of the international consensus on opening trade. Protectionism is as contagious as cholera.

    I agree that the US (and everybody else) needs to get serious about theft of ideas. But that didn't start with China. Japan was/is just as bad.

  5. In which way Japan would still be doing it?

  6. They ignore patents. My brother spent 18 months there in the '80s as the Navy's prospector for technology. He put it this way (he is fluent in Japanese, although he never let anyone in Japan know that):

    They think it is stupid not to use the best methods.