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Comment by fosk | Hacker News Reader

To be fair this strategy will work if other countries cannot tolerate tariffs for long enough to come up with non-USD trade that is accepted by everyone. Which to be fair may take them a very long time.

If they fold and remove tariffs on the US (so the US can drop the tariffs on them) before coming to an agreement because the economical pressure of tariffs is too high, then this will result in the largest market expansion the United States has ever seen.

My point is: yes lots of negatives can happen, but let’s also look at what happens if it works out so we are intellectually honest about what’s going on here.

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> If they fold and remove tariffs on the US

The issue with this is the "reciprocal" tariffs that were announced are not related in any way to tariffs imposed by other nations. According to the administration, they set the tariff rate for each country as (trade deficit / (imports * 2)). Obviously the country in question cannot undo this even by zeroing all tariffs with the US, because none of this is based on tariff rates.

It's not really only about tariffs. It's about the net effect on all barriers of trade, such as currency manipulation, subsidies, regulations, etc. The formula (trade deficit / (imports * 2)) means that countries actually have to address the root of the problem and prove it before the US reduces their tariffs.

Having a trade surplus doesn’t mean you’re cheating.

If I make products better/cheaper than you, I’m going to sell more to you than you are to me.

Ditto if I have some valuable resource you need that represents a large share of my economy. The fact that you need my germanium more than I do doesn’t mean I’m ripping you off.

I agree that a deficit could be healthy and fine and doesn't mean that the other country is cheating. The problem is how some countries have ruined it for everyone else by exploiting the current system. For example, after the first round of Trump tariffs, Chinese companies began moving factories to Mexico in order to take advantage of USMCA.

A thought experiment. Imagine a small poor country far from the US, of 1 million people, where the average income is $3000 annually ($3 billion total household income). Imagine a factory in that country that produces shoes beloved in America.

Those shoes are so popular in America that Americans buy $1 billion of those shoes every year. In order to address the problem as stated, this hypothetical country would have to spend a third of its household income purchasing products produced in some of the highest-cost conditions in the world. To do so, they would have to shut out their local trading partners from whom they currently buy goods at prices they can afford. This would have the effect of making them even poorer.

Does this make any sense?

If you make an exception for this hypothetical country, then countries such as China would come in and build factories there and bypass their own tariffs. You're back to playing whack-a-mole.

I’m not talking about making an exception. I’m suggesting that a trade deficit can arise for reasons that have nothing to do with manipulation.

Also, the administration created the loophole about which you worry by creating a 24% tariff gap between China and the new 10% baseline for most countries.

Except that because the rule is clear, China will anticipate that doing this in another country will result in eventual increased tariffs. They will be able to see ahead that it's not worth making a big investment for that purpose. The optimal strategy changes to do more business with the US and/or build factories in the US.

(so the US can drop the tariffs on them)

That would require other countries trusting the promises of the current administration, yes? How much credibility does the Orange One have on the world stage?

British tariffs come to a weighted value of 1.02%. That's what the US is worried about, 1.02%. Seriously.

> If they fold and remove tariffs on the US

Part of the problem is that Trumps's definition of tariffs doesn't make any sense. VAT isn't a tariff but according to Trump it is.

Does he seriously expect other nations to just get rid of VAT? Or somehow replace it overnight with some other system all just to appease the US? Because that's the only way you can lower 'tariffs' to zero.

It just won't happen and we'll be in a continual standoff until Trump concedes that trade barriers are not in fact a good thing for anyone. He'll never admit it, but it wouldn't surprise me at all if the illusion of a 'deal' is struck in order to save face and reverse this mess once it becomes clear it's not sustainable unless you want to shrink your economy and destroy others at the same time.

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