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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day – The new mercantilism

There is strategic competition with economic rivals, notably China, especially around advanced technology, supply-chain dominance, and industrial sovereignty.

But tariffs raise costs for domestic firms that rely on imported components, in some cases hurting US manufacturers rather than helping them. Indeed, recent data show US manufacturing has contracted, with some firms citing tariffs as a reason for layoffs or relocation. Retaliation from trade partners can offset gains via higher tariffs abroad, disrupted supply chains, and increased uncertainty.

The welfare benefits of rising domestic output are modest under many models because gains might be outweighed by efficiency losses, higher consumer prices, and reduced variety. And the government risks politicizing trade decisions, which may lead to cronyism or poorly targeted protection by helping politically connected sectors rather than broadly boosting national economic health

Madsen Pirie

1 comment to Samizdata quote of the day – The new mercantilism

  • Johnathan Pearce

    It’s sad that this even needs to be pointed out. Protectionism backfires almost always.

    America’s most sensible policy regarding industry is on energy. US energy input costs are far below those in Europe. That’s a major edge. And largely self inflicted in Europe’s case.

    For sectors that have military dimensions, it would be better to shield certain industries temporarily and with a clear limit.

    What about IP theft and China in particular? My suggestion for any country is to require all Chinese exporters to enter JVs. They require that of us, so it’s fair to return the favour. That includes tech transfer.

    Tariffs are a blunt instrument in response to these specific issues. That includes complaints about currency manipulation, much of which doesn’t really apply. The dollar is down quite a bit against a basket of currencies, including the yuan.

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