4 ms·

One thing that I'd like to inject into this discussion, is that the nominal trade imbalance is not the only relevant figure, and maybe not the most important on

by mppm 2y ago

One thing that I'd like to inject into this discussion, is that the nominal trade imbalance is not the only relevant figure, and maybe not the most important one. For many goods, there is a very strong disconnect between the market value (the lowest price you can offer a group of suppliers competing against each other) and what one might call, for lack of a better word, true value (the price you'd be willing to pay if you had no alternatives). For luxury goods, these are often nearly the same, while basic goods might have a 5x difference and antibiotics could well have 1000x. When this is taken into account, the trade between the West on the one hand, and China and Russia on the other, is not unbalanced by a factor of 2, but more like 20. The West receives a huge amount of energy, manufactured products, chemical precursors, electronics, technological supplies, medical supplies and basic medicines. And in return they send champaigne, BMWs, branded clothing, intellectual property, and yes, some aircraft and photolithography machines. The effect of this has already been demonstrated once with the mostly unsuccessful sanctions against Russia, but would be felt ten-fold if there were a major disruption of trade between China and the West. China is at a point in their development, where they really could walk away from trading with the West if they really had to, but the Western economies would likely be sent into shock by such a step. Not that I think this is likely to happen, but I do get the feeling that the new tariffs are mostly giving China a leg-up towards full economic independence, while onshoring the US industry will be a very long and painful process.

bathtub365 2y ago
I’m not sure what you mean by “the West” in this context. No one besides the US are unilaterally raising tariffs on China. The US stands alone in this and the rest of us are fine to keep trading with China while whatever agenda is being pursued by the US regime.
- mppm 2y ago
  I'm just making a general point, since the trade between China and the EU is qualitatively similar to China-US. And while the EU is anti-Trump at the moment, I do not think it is beyond aggressive economic action against China for political reasons, if nothing else. (And let's not forget about the new tariffs on Chinese electric cars).
  - vitorgrs 2y ago
    U.S is giving tariffs to everyone, though...
tim333 2y ago
I'm not sure the 'true value' is that important for trade. Taking the example of antibiotics, they may be worth 1000x the cost of production but if country A stops selling them you can just make them in country B. We got by fine without Chinese exports until they started becoming a thing from around 1990 on.
- mppm 2y ago
  Long-term -- yes; short and medium-term -- not necessarily. For example, during and after Covid, Germany had a very severe antibiotics shortage. I think it is still ongoing to some extent. On one hand, it seems ridiculous to suggest that Germany is incapable of producing all the antibiotics it needs. On the other hand, ramping up production that has been offshored is not that easy, and is a lot more expensive initially. Same thing with the chip shortage -- these weren't even close to leading-edge chips, but trying to ramp up production domestically would likely cost 10x or more. Same with Russian gas, or any number of other things. Supply chain crunches can do a lot of damage even for individual products. If they were to happen simultaneously across multiple industries, the effect could be truly disastrous.
  - leereeves 2y ago
    > Long-term -- yes; short and medium-term -- not necessarily. For example, during and after Covid, Germany had a very severe antibiotics shortage. I think it is still ongoing to some extent. That sounds like a good reason to favor local manufacturing. > On the other hand, ramping up production that has been offshored is not that easy, and is a lot more expensive initially. And that sounds like a good reason to do it now and not wait for a crisis when the consequences would be worse.
  - ethbr1 2y ago
    > On the other hand, ramping up production that has been offshored is not that easy, and is a lot more expensive initially. It depends on the nature of that particular good's production. Some industries are incredibly supply-chain and labor-intensive. Others are capital-intensive. Others may be knowledge-intensive. A country should seek to compete in industries it has the most core competencies in.
ASalazarMX 2y ago
If there's lack of a better phrasing, I would rename "true" value as "maximum extraction" value.
snapplebobapple 2y ago
I get what you're trying to say but I don't think it's couched in a way that is understandable to the average person. I think a more understandable way to put it is to point out USA will be ok on the very base things like food and energy (assuming they don't piss us Canadians off further) but China has competed to a almost nothing the next few rungs up the ladder to the point where production capacity outside China (and certainly within USA and the dwindling number of deeply friendly nations) is almost non existent. This includes very, very valuable things like chemical precursors and finished products in everything including biotech, building supplies, factory parts, etc. So a world where China walks away pretty quickly falls apart to a much lower standard of living for everyone in the west for a decade or possibly two. That world would be much blander food wise, much more exposed to the elements for many more of us and with much more death from treatable disease. We have an opportunity here to rebuild the industrial capability and walk ourselves a bit further up the cost structure now with the help of having access to chinese output and what we are doing instead is pretty foolish. That talk of what we pay vs what we would pay is being used in your argument to point out the pain of losing access to a cheap chinese product when it's more useful for antitrust discussion of where market power is being abused and instead just pointing out the direct pain of a china walking away situation in my opinion.

by mppm 2y ago

bathtub365 2y ago

I’m not sure what you mean by “the West” in this context. No one besides the US are unilaterally raising tariffs on China. The US stands alone in this and the rest of us are fine to keep trading with China while whatever agenda is being pursued by the US regime.

mppm 2y ago
I'm just making a general point, since the trade between China and the EU is qualitatively similar to China-US. And while the EU is anti-Trump at the moment, I do not think it is beyond aggressive economic action against China for political reasons, if nothing else. (And let's not forget about the new tariffs on Chinese electric cars).
- vitorgrs 2y ago
  U.S is giving tariffs to everyone, though...

tim333 2y ago

I'm not sure the 'true value' is that important for trade. Taking the example of antibiotics, they may be worth 1000x the cost of production but if country A stops selling them you can just make them in country B. We got by fine without Chinese exports until they started becoming a thing from around 1990 on.

mppm 2y ago
Long-term -- yes; short and medium-term -- not necessarily. For example, during and after Covid, Germany had a very severe antibiotics shortage. I think it is still ongoing to some extent. On one hand, it seems ridiculous to suggest that Germany is incapable of producing all the antibiotics it needs. On the other hand, ramping up production that has been offshored is not that easy, and is a lot more expensive initially. Same thing with the chip shortage -- these weren't even close to leading-edge chips, but trying to ramp up production domestically would likely cost 10x or more. Same with Russian gas, or any number of other things. Supply chain crunches can do a lot of damage even for individual products. If they were to happen simultaneously across multiple industries, the effect could be truly disastrous.
- leereeves 2y ago
  > Long-term -- yes; short and medium-term -- not necessarily. For example, during and after Covid, Germany had a very severe antibiotics shortage. I think it is still ongoing to some extent. That sounds like a good reason to favor local manufacturing. > On the other hand, ramping up production that has been offshored is not that easy, and is a lot more expensive initially. And that sounds like a good reason to do it now and not wait for a crisis when the consequences would be worse.
- ethbr1 2y ago
  > On the other hand, ramping up production that has been offshored is not that easy, and is a lot more expensive initially. It depends on the nature of that particular good's production. Some industries are incredibly supply-chain and labor-intensive. Others are capital-intensive. Others may be knowledge-intensive. A country should seek to compete in industries it has the most core competencies in.

ASalazarMX 2y ago

If there's lack of a better phrasing, I would rename "true" value as "maximum extraction" value.

snapplebobapple 2y ago

I get what you're trying to say but I don't think it's couched in a way that is understandable to the average person. I think a more understandable way to put it is to point out USA will be ok on the very base things like food and energy (assuming they don't piss us Canadians off further) but China has competed to a almost nothing the next few rungs up the ladder to the point where production capacity outside China (and certainly within USA and the dwindling number of deeply friendly nations) is almost non existent. This includes very, very valuable things like chemical precursors and finished products in everything including biotech, building supplies, factory parts, etc. So a world where China walks away pretty quickly falls apart to a much lower standard of living for everyone in the west for a decade or possibly two. That world would be much blander food wise, much more exposed to the elements for many more of us and with much more death from treatable disease. We have an opportunity here to rebuild the industrial capability and walk ourselves a bit further up the cost structure now with the help of having access to chinese output and what we are doing instead is pretty foolish. That talk of what we pay vs what we would pay is being used in your argument to point out the pain of losing access to a cheap chinese product when it's more useful for antitrust discussion of where market power is being abused and instead just pointing out the direct pain of a china walking away situation in my opinion.