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So what, the exchange rate in that case would change so US consumers lose buying power for EU imports as a sort of automatic customs fee and as a result would p

So what, the exchange rate in that case would change so US consumers lose buying power for EU imports as a sort of automatic customs fee and as a result would prefer locally made alternatives? I would question how well that works outside completely generic goods that you can buy anywhere, since with economies of scale consolidating production there is often hardly any alternative anymore. Also, feels like there could be a way to manually address the balance without reducing people's standard of living.

whatshisface 2y ago
The balance is not maintained for individual goods, but rather for the whole market. If the EU is better than the US at manufacturing everything, the exchange rate will fall until the US can at least do one thing cheaper. Exchange rates don't help raise people's standards of living, but they do prevent countries from becoming economic dead zones.