Quote:
Originally Posted by Listener2307
Yes. It has worked very well for China, and it worked for Japan, too.
Both those countries are very happy with the results of their trade war. But then America never even fired a shot.
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Actually, America has fired many successful shots. We have used tariffs to protect various industries for over 150 years, and have many tariffs that have been employed since the end of World War II that are still in effect.
The trick to tariffs is balance. The Japanese wanted to protect some of their products more in other places in the world than the United States, but the U.S. was included in their tariffs, to a lesser degree than Singapore (for example).
In return for getting the tariff break from Japan, the U.S. lessened it's own tariff rates on some stuff the Japanese bought from us.
So both sides get a little and give a little. Those nations who are most cooperative with each other tend to have the most balanced tariff policies with each other.
Not all nations are equally willing to commit to balance, however. So with some, higher tariff rates are a way of controlling their trade expansion, but it has to be carefully done. A little pressure may work, while a lot of pressure won't.
What happens when a lot of pressure doesn't work? A flood of over-cheap goods, sold at a loss to the mother country, in order to kill their competition abroad in the nation that bit them the hardest. When an industry is fully supported by it's government, and is willing to bear the costs of rebuilding a ruined industry that was crippled by tariffs, no cost is more than the government will bear if they think the industry is important enough.
This is exactly what Japan did 40 years ago. After the nation finally rebuilt after it was trashed in WWII, Japan had brand-new heavy industries galore. Modern steel works and foundaries. Highly effecient production lines. The newest technologies. The newest and most efficient worker production techniques.
Their main national priority was putting to work 2 generations of Japanese laborers. Japan was still contending with very punishing tariffs that had been set after the end of the war. Those tariffs allowed only the shoddiest of Japanese goods to be exported cheaply. And there's no money to be made in shoddy goods for a nation that depends on exports to survive.
So the Japanese government fully backed it's most profitable industries to the hilt. If a company could not afford to pay its labor costs selling it's goods too cheaply to make any profit, the government paid the workers. And the government allowed the company to keep up the flood of high quality goods to the rest of the world.
Eventually, that policy changed the world-wide Japanese reputation. Instead of making shoddy goods, the Japanese products became known for their quality, attention to detail and durability, and became preferently chosen over their competitors.
So there was no longer a need for the government support. The high tariff barriers were broken, and though tariffs remained, they were lowered and made more balanced.
This placed their competition into a position where they must modernize and learn the same things voluntarily that the Japanese had to learn with no recourse.
American steel production failed to modernize. It dominated so long with its old technology there was no need to modernize. But once it had competition, it needed to either operate at enormous loss and bear the costs of rapid modernization alone, or rely on the government to back up those costs.
Because the cost was going to be massive, our government decided not to back up the steel industry. Too much up-front cost with stiff competition headwinds blowing against the industry, the government of the day thought.
So, since it was cheaper to import foreign steel than buy the home-made stuff, that cost more to make because of inefficiency, one by one, the old steel plants closed after falling behind ever further because the old technology was wearing out along with being inefficient.
We could bring it back, but we won't. Because such full government commitment is considered to be socialism at its worst here. We see it as a violation of free enterprise.
The Japanese saw it as a matter of national survival and eventual prosperity, political philosophy be damned. If it was socialism, so what? The government and its people were united hand in hand and intertwined from top to bottom. And every Japanese became more prosperous than they had ever been before.
So what happened to Japan afterward? Their ancient culture overtook them. The Japanese have always been great savers and reluctant spenders on a crowded little bunch of islands. Once the average Japanese had enough income to get by, the extra was put into savings. They didn't go blow the extra on toys, bigger houses, more cars, etc.
And because they were now eating better, living longer, and less needy, they quit having babies. So their economy became top heavy with investment, mired into stagnation by the Japanese urge to save, save, save.
And with an aging population that is gradually declining, the lack of children gives them no reason to spend, spend, spend. The Japanese will get by just fine for a very long time now with things just as they are. It's making life hard on their kids, but kids everywhere are having the same hard times.
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