Timely reminder from Brad Setser about the unintended consequences of trade spats, using the US tyre tariff/Chinese chicken feet retaliation from 2009.
Brad’s posts are often quite technical and dense, so I have taken the liberty of annotating his charts below to tell the story:
The lessons being:
- there are lots of unintended consequences to trade spats – US tyre manufacturers won the first battle but lost the war
- there are ways around targetted tariffs (most are not as obvious as the chicken feet example), these ways usually enrich middlemen and leave both consumers and producers worse off
We (not eagerly) await Trump’s first salvo in the upcoming trade wars… I have no idea how significant it will be.
Damien Klassen is Chief Investment Officer at the MB Fund launching in April 2017. Register your interest now (if you haven’t already):