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Static analysis in trade is very dangerous. I have never understood why these models are used. These had massive political consequence in the UK during Brexit,
by skippyboxedhero 9mo ago
Static analysis in trade is very dangerous. I have never understood why these models are used. These had massive political consequence in the UK during Brexit, close to 100% of the predictions made by these models failed, and they were taken as truth (in the sense that: a prediction was made, and that was reported in the same way as an economic release). There was no real examination of why these known bad models were used.
Calling it a "deadweight loss" also doesn't seem justified by the evidence. It is extremely unclear whether there is a total economic loss because tariffs, if maintained, will have long-term economic consequences. You can point to countries where that went very badly (South American import substitution in the 50/60s, leading to economic free fall by the 80s) and ones where it went very well. It has always seemed quite unclear to me.
The stuff with Europe is also very odd because what do they think sanctions on Russia are? Not just a tariff, a blockade with no revenue raise. But the people who tell you that tariffs are a tax will tell you that sanctions have no issues.
I don't think that tariffs are good either btw. It just seems to a policy choice that is made in a context that can be either good or bad. Europe has massive barriers to trade internally (despite being in a political and economic union) that has been very expensive and harmful because it reduces competition/competitiveness. At least some of the protectionist measures of Trump and Biden are likely to work because the US is fundamentally quite competitive.