Read the Miran paper. It’s not about imbalances. It’s about negotiating leverage. Australia in particular is going to be the most interesting case in the world.
Strategically, Australia is more sympathetic to the US, but your trade with China is many multiples of your trade with the US. If you join the US you’ll have to raise tariffs against China and if you don’t you’ll naturally fall into China's orbit. Interesting times!
- These tariffs are permanent to rebalance trade
- These tariffs are temporary to use for negotiations
If they're permanent:
- US companies build factories
- Manufacturing comes back to the US
- China is left manufacturing what the US can't do locally
- China will dramatically up cost of resources US can't source elsewhere
- Nobody wins
If they're temporary:
- China waits out the storm
- Prices revert back to the mean
- Nobody wins
So either way:
- Countries have divested US exports
- US has lost long term income
- US has lost soft power (and eventual hegemony)
- There's now a lot of pissed off people
Even looking at what's happening to Las Vegas, the number of pissed off people will likely go up even if tariffs went back to before or brand new trade deals were signed across all trade paths let alone even a handful.
I'd be keen to know your thoughts. And thanks - I just added the Miran paper to my Kindle, so thanks for the reference!
> Strategically, Australia is more sympathetic to the US, but your trade with China is many multiples of your trade with the US. If you join the US you’ll have to raise tariffs against China and if you don’t you’ll naturally fall into China's orbit. Interesting times!
As an Australian, I'd put the odds of Australia imposing strong tariffs on anyone at very close to zero.
After we gave up on tariffs about 20 years ago we've seen only growth. We are one of the few (only) western economy to have not had a recession in that time. It's not something we are likely to give up on easily. Both the major political parties have firmly re-iterated a "no tariffs" policy.
As for "moving towards China" - I don't see much evidence of that. Australia is firmly rooted in the West. But there has been a change. Right now, I think it's true to say Australia is wondering if Trump's USA is as firmed root in the West as rest of the OECD is. I guess it's possible Australia may drift away from the USA as a consequence, but it won't be towards China. And it won't happen in the short term as Trump's USA is viewed as a temporary thing that will end with Trump.
None of this has much to do with the topic the paper is discussing. Australia has also been on the receiving end of China's industrialisation, so I imagine most Australian's would look on with interest and sympathy at the USA's attempt to undo the worst effects.
… it was never about imbalances but protectionism and racketeering