Trade war FOR Treaties?

A 90-day tariff pause that does not apply to China has been announced. This pause acting as a window is to reorganise and redeploy America's global/international financial  operations and reallocate resources? An operation that also avoids and excludes China, possible or desirable?

This post will zoom out to the processes and dynamics that create the overall(big?) picture rather than focusing on how tariffs affect particular industries, sectors, or geographical areas.

Global trade flows and national deficits are significant indicators and crucial measures to gauge, track and evaluate our movement in this direction. These metrics and indicators demonstrate how, over many years, domestic growth, regional cooperation, and globalization became intertwined. It is and has been a complicated process based on centuries of integration, treaties, trade routes, and established networks. The idea and goal was to lead to a more inter-dependent, prosperous, secure and peaceful order. Simultaneously during this process certain regions and countries maintained and consolidated their lead and global inequalities within and among nations rose and some disparities got exacerbated. We held on to the notion and belief that there is a place for every region, each country and all groups.

 

War, trade and treaties are intertwined, interwoven and interlinked : as forms of human cooperation.

 

This period beginning with the pause and extending beyond can function as a window to reorient priorities? Outlaying the policy and administrative foundations for change but not to complete them. Why is that so? Why can't a new order be purposefully design in quick time that sidelines, marginalises or excludes China?

 

China is ranked second by the majority of economic indices and counts. According to a number of predictions and forecasts, China is expected to overtake all other countries in the near future. Are Trump's economic priorities and signals being driven by this factor or the trade deficit? Have we carefully considered the advantages and disadvantages of taking this course in light of the industrial and financial integration (the coupling) between these two countries and the world? Especially in the age of supply chains, assembly plants, offshore production, investment ecosystems, and the drive toward innovation and cost reduction?

 

Image sourced from wordclouds.com

 

There are many cons that raising and spiraling tariffs can lead to. Few assessments of what is at stake, if the two largest economies decouple are available. The link provides an estimation that factors demand and supply risks, its volume, effect and strategies that underlies such scenarios. China Briefing's comparison of US and China economy and their estimation and outlook for 2025 also deserves mention in this context.

 

Any attempt to sideline, marginalise or exclude China would not only disrupt established economic relationships but also risk unintended consequences( recession, breakdown and collapse) for domestic industries and allied economies worldwide. If a longer timeline and structural change, fresh set of negotiations, institutions and adjustments are needed to reorder the global economic order, tariff regime serves what purpose? It is a strategic signal, inflection point and declaration of intentions, not a proper plan? Are policymakers going to rally political support domestically and externally and stimulate and seek new alliances and investments during this period?

Wholesale tariff regime signals that building, maintaining and sustaining global arrangements through institutions and treaties is no longer a US priority?

Protectionism, regional co-operation and globalisation intersect, overlap and crisscross. The interplay between protectionism, regional cooperation, and globalization is a fascinating and complex dynamic. These forces often shape the global economic landscape in profound ways, and analyzing policy shifts within this context can reveal significant insights. Additionally, using them as separate pieces serves as an analytical tool to identify and monitor changes in policy. Such an analysis allows nations to tailor their strategies for their advantage through domestic adjustments or regional and global agreements.

Protection policies like tariffs, trade barriers, and subsidies are often pursued to shield domestic industries from foreign competition and are legitimate. Protective measures also protect jobs domestically and enhance the self-sufficiency of nations. Excessive use of protective policies aimed at domestic consolidation and expansion loses out on advantages of regional co-operation. Regional co-operation fosters peace and security by investing in shared growth and cultivating inter-dependencies. Regional co-operations also have economic advantages. When terms of trade factor technological innovation and movement of labor and capital across national boundaries, they bring economic benefits and advantages. The interconnections and interdependence of people spill over the national boundaries. Regional cooperation, internationlisation and globalisation tap and benefit from these connections between people in numerous ways.

 

Economic nationalism and geo-political rivalries precede globalisation and are rearing again.

 

Trade, whether domestic or international is not a zero-sum game.

 

Allow me to present two propositions. The first proposition works as a partial explanation. The weakening and near collapse of local economies in South America(north and central) is fueling migration, which bothers its relatively rich and more secure north. Local economies are locked with global orders. The second proposition is ambitious and posits an imagined and normative arrangement. Tariff related discussions and debates are also an occasion to reflect and re-imagine arrangements and systems. Many( experts, observers and laymen) present/visualise national, regional and global arrangements as competing or as rivals for resources and allegiance. Can we imagine and inject fresh synergies with and within them.

 

Trade war for treaties.

 

China is an economic powerhouse and ranks second across numerous benchmarks. It is important. As things stand, and for decades the United states of America is numero uno. In these terms it is more important. The policy and course these countries opt for, choose and pursue for domestic consolidation has a bearing on economies elsewhere. The rising tariffs, reciprocal or retaliatory tariffs will have global repercussions.

 

 'US GDP 25.4 trillion dollars. China GDP 17.9 trillion dollars. US exports 3.0 trillion dollars. US imports 3.8 trillion dollars. The import/export difference is trade deficit/surplus. US economy : Primary sector less than 1 percent, Secondary sector 19 percent,Tertiary sector 80 percent. US : Government contribution less than 3 trillion. 88 percent from private industries. Next three largest economies are all below 5 trillion.'

 

The US protected its automobile industry and opted for multilateral/global operations in technological sector( computers, servers and chips). US also sought investment opportunities and pushed toward offshore manufacturing in many sectors. If that is true, who is affected by tariffs? Supply chains is a trendy word. Most people think it is about finished products, but it's not. Modern industrial products are sourced through various regions and via complex processes. Agricultural output depends on fertilisers, pesticides and machinery, which might be sourced from elsewhere.

 

I have been seeking information, perspective and insights on this subject and also prompted and queried few AI bots. When I asked Co-pilot who will be affected by tariffs, in other words who will pay the price, it listed four parties:

1. Who is affected by tariffs?

   • Consumers: Tariffs often lead to higher prices for imported goods, which are passed on to consumers. For example, in the U.S. automobile industry, tariffs on imported cars and parts can increase vehicle prices significantly.
   • Manufacturers: Companies relying on imported components face higher production costs. This is especially true for industries like automotive and electronics, where supply chains are global and interdependent.
   • Exporters: Retaliatory tariffs from other countries can hurt U.S. exporters, reducing their competitiveness in global markets.
   • Farmers: Agricultural sectors are also impacted, as they depend on imported fertilizers, machinery, and other inputs. Tariffs on these imports can raise costs and disrupt operations.

   Interestingly, this list( lists manufacturers) does not include companies, multinational corporations and countries. Well, that's not true. Countries, corporations and companies are most affected by tariffs. Under capitalism, the relationship between companies and state is more inner, intimate and deep.
   
   It agreed with the complex and interdependent nature of supply chain and the fact that trade war would impact the entire economy, including agriculture.
   
   About supply chains beyond finished products, Co-pilot's text is reproduced below:

2.  Supply chains beyond finished products:

   • Modern supply chains are indeed about sourcing components, raw materials, and intermediate goods from various regions. For instance, a car might have an engine from Japan, tires from South Korea, and electronics from Germany, all assembled in the U.S. Tariffs on any of these components can ripple through the entire production process.
   • Similarly, agricultural outputs depend on a web of inputs like fertilizers, pesticides, and machinery, which are often imported. Disruptions in these supply chains can affect food production and prices.

Co-pilot's example of supply chain via the car example illustrates what assembly plants do and how inter-dependencies play out. If the chain breaks, one country may be left with engines, another with tires while another with the cables and electronics! No one will have a car, or the price of their parts will shoot up.

 

Irrespective of the industrial location of manufacturing and assembly plants the financial control and ownership is often a distinct dynamic. Understand that although Apple is shifting/relocating its assembly and manufacturing plants, it is an American company. The tariff provisions aimed at China and other countries will hurt American enterprises, companies and corporations as well.

 

When we think about global arrangements, regional cooperation and interlocking local economies we think beyond the US. Take the example of BRICS as a block. BRICS aims through NDB, CRA to set up parallel financial institutions of Bretton woods and visualizes de-dollalrisation of international trade and world economies as feasible, realisable goal posts.

 

What are you for? Take f*(this and that) out from for, then, what are we left with?

 

Trade war or treaties?

 

Image generation ( BRICS) by Co-pilot

 

Note: Gemini, Google's AI generated an interactive web page from this content. The interactive captures most aspect of the text and especially SVG car graphic( the maze) is excellent illustration for educational purposes.