American trade policy has gone so far in the direction of Mercantilism that both the Neoliberal and the Keynesian economists can agree on something. That's not a good thing.
Keynsian economists are in favour of reducing global imbalances. While tariffs are a crude and disruptive tool to achieve it, the US ultimately can unilaterally close the gap.
What is misleading is labeling a global system marked by large, persistent imbalances as benign or indicative of "free trade". A healthy free trade system should have balanced trade, and the reasons that are not are unfortunately the fault of surplus nations like China or the EU. I know, its unintuitive, but going back to Bretton Woods to IMF analysis will back this point.
P.S if one wants to note the grocery shop analogy, a better analogy is that if you count up all your transactions, your income should exceed your spending, or else you're probably in trouble. That's roughly the problem here, but made more complex with the shenanigans of the US dollar.
Mercantilism is bad in itself, but the unpredictably is another special factor, leading to lower business confidence and lower investment. Why would anyone do anything when the rug might get pulled? Better to save and wait a few years. It's no surprise the US is seeing weak manufacturing investment.
corimaith|1 month ago
What is misleading is labeling a global system marked by large, persistent imbalances as benign or indicative of "free trade". A healthy free trade system should have balanced trade, and the reasons that are not are unfortunately the fault of surplus nations like China or the EU. I know, its unintuitive, but going back to Bretton Woods to IMF analysis will back this point.
P.S if one wants to note the grocery shop analogy, a better analogy is that if you count up all your transactions, your income should exceed your spending, or else you're probably in trouble. That's roughly the problem here, but made more complex with the shenanigans of the US dollar.
energy123|1 month ago