Trade War Saga: July 18th 2018
I'm not happy that people are suffering. Frankly, I'm not happy that I'm right. But, it JUST KEEPS HAPPENING. I never expected that the response would be so rapid. But, I keep reading story after story about countries rallying against the US and planning to diversify away from US trade. I keep reading about American companies hurt by the trade war. And I keep on feeling that the US is losing prominence on the global stage on a daily basis.
I don't take back my claims that Canada will likely hurt more in the long run. The above article really only focuses on the impact states side.
But, this article doesn't JUST reinforce my belief that an ongoing trade war will ultimately stand to hurt the US more than anyone else. It also proves my point about dependence. People like to look at how much, by volume, of trade goes this way or that. And then use that data to draw conclusions. Those conclusions tend to be linear, in accordance with those import and export numbers. But, the reality is, as I argued, a lot more level than numbers alone tell.
The US cannot operate all of it's current businesses self-sufficiently. If it could. There would be little to no impact states side from the tariffs. If the US was wholly self sufficient in these industries, that would mean that there was enough product within the US alone to meet the needs at (or very near) the current prices. And we wouldn't have articles like this floating around. But, the tariffs were too large and too rapid. And it exposed the truth. American businesses can't survive the tariffs.
The bigger they are, the harder they fall? It certainly seems true. Basically, the US is a much more competitive market. International trade and the massive buying power of the US have enabled a "race to the bottom" in virtually every industry. Which means, most American businesses are operating on razor thin margins. And those margins are only possible by sourcing goods (and sometimes even services) at prices which simply aren't possible locally.
In the end, there are only two options. Go broke or charge more. And significantly more. And if everything costs significantly more, then it doesn't just hit the businesses. It even hits consumers which aren't in businesses impacted directly.
Canada, on the flip side, has a dollar which fluctuates a lot more and is consistently worth less than the US dollar. But, this means our businesses and consumers are accustomed to paying more for the same things. This gives us a better chance at diverting business elsewhere when demand dries up in the US. So, even if we need to source it from another country at a higher cost, if we aren't slapping tariffs on those other countries, the difference, in the long run is a lot less likely to hit as hard.
But, as I said before, Canada will likely hurt and hurt more in the beginning. It takes time to make those changes. However, as also stated earlier, change IS happening and rather rapidly. Mexico, China, Japan and the EU are all making more bi-lateral trade agreements either without the US entirely, or designing them in such a way to break their dependence on the US markets.
And once businesses in those countries start satisfying their needs outside of the US, they aren't simply going to come back because the tariffs disappeared. It will take a change in trade agreements again to send those companies looking elsewhere.
I don't take back my claims that Canada will likely hurt more in the long run. The above article really only focuses on the impact states side.
But, this article doesn't JUST reinforce my belief that an ongoing trade war will ultimately stand to hurt the US more than anyone else. It also proves my point about dependence. People like to look at how much, by volume, of trade goes this way or that. And then use that data to draw conclusions. Those conclusions tend to be linear, in accordance with those import and export numbers. But, the reality is, as I argued, a lot more level than numbers alone tell.
The US cannot operate all of it's current businesses self-sufficiently. If it could. There would be little to no impact states side from the tariffs. If the US was wholly self sufficient in these industries, that would mean that there was enough product within the US alone to meet the needs at (or very near) the current prices. And we wouldn't have articles like this floating around. But, the tariffs were too large and too rapid. And it exposed the truth. American businesses can't survive the tariffs.
The bigger they are, the harder they fall? It certainly seems true. Basically, the US is a much more competitive market. International trade and the massive buying power of the US have enabled a "race to the bottom" in virtually every industry. Which means, most American businesses are operating on razor thin margins. And those margins are only possible by sourcing goods (and sometimes even services) at prices which simply aren't possible locally.
In the end, there are only two options. Go broke or charge more. And significantly more. And if everything costs significantly more, then it doesn't just hit the businesses. It even hits consumers which aren't in businesses impacted directly.
Canada, on the flip side, has a dollar which fluctuates a lot more and is consistently worth less than the US dollar. But, this means our businesses and consumers are accustomed to paying more for the same things. This gives us a better chance at diverting business elsewhere when demand dries up in the US. So, even if we need to source it from another country at a higher cost, if we aren't slapping tariffs on those other countries, the difference, in the long run is a lot less likely to hit as hard.
But, as I said before, Canada will likely hurt and hurt more in the beginning. It takes time to make those changes. However, as also stated earlier, change IS happening and rather rapidly. Mexico, China, Japan and the EU are all making more bi-lateral trade agreements either without the US entirely, or designing them in such a way to break their dependence on the US markets.
And once businesses in those countries start satisfying their needs outside of the US, they aren't simply going to come back because the tariffs disappeared. It will take a change in trade agreements again to send those companies looking elsewhere.
Comments
Post a Comment