
Ask HN: Why don't countries settle on equal balance of trade? - TekMol
What is the argument against the US raising their tariffs with countries they have a trade deficit with? Doesn&#x27;t it make sense to export as much to a country as you import?
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alexhutton
The argument against tariffs is that they are a tax and therefore coercive and
immoral. Further to that, tariffs reduce the overall volume of trade, which
negatively impacts overall economic activity. Another angle is that tariffs
reduce specialisation, which means that overall productivity falls. The final
point is that trade tariffs can create animositiy between countries, which can
escalate “When goods don’t cross borders, soldiers will” .

The correct way to address trade imbalances is by addressing the root cause,
which is the expansion of money supply in the trade deficit country.

If you have a fixed quantity of money, then you cannot run indefinite current
account deficits. This is because you sell your money to buy the goods and
when the money runs out you can't buy any more goods, unless you sell some
goods to obtain money.

Hard money is a natural inhibitor against trade imbalances. It creates self-
balancing trade where, mathematically, one country cannot take more than they
give.

The USA has had an exponentially increasing money supply for decades, then in
2008 it climbed rapidly, more than quadrupling within 5 years. Trade deficits
simply wouldn't be possible without this. But the USA government needs the
expanding money supply to support its fiscal deficit, otherwise it wouldn't be
able to finance its warface/welfare state.

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TekMol
I understand that you say tariffs are bad. So do you say the EU should lower
their tariffs? As I understand it, the EU tariffs are even higher then the US
ones. Thats why I wonder why the EU calls it a trade "war" when the US
increses their tariffs.

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alexhutton
Tariffs negatively impact the country that imposes the tariffs, because it is
a tax on imports.

For example, steel is used by many businesses in the USA to create products
which brings profit to those businesses. If the price of steel goes up due to
a tariff, then it affects the profitability of those businesses. Businesses
which actually produce steel itself would be able to obtain higher profit
margins because they no longer need to compete with cheaper exports, but the
overal affect on the economy is negative.

So if you look at the EU, yes, they should lower their tariffs, but they are
hurting themselves with their tariffs. So the idea of reciprocol trade barrier
reduction is incorrect. The country the eliminates tariffs benefits regardless
of what the other country does.

But this does not happen for policital reasons and that is why the EU talks
about trade wars. It's to look good to their voters. You'll notice in trade
deals each country tries to get wins for targetted on certain special interest
groups within their country. But this is in spite of the fact that if all
trade barriers were removed it would result in the greatest possible benefit.

If you get tariffs, ie governmental inteference in trade, you can suddenly
have large firms become unprofitable which leads to mass layoffs. So
governments get up and say they blame the foreign government for it. And they
may impose tariffs as a reprisal. In other words, if the actions of the
foreign government are unpopular, it gives them cover to bring in tariffs that
benefit certain special interest groups, increasing their political power
within their country. And, in general, if a population thinks they are being
attacked it usually galvanises them to support their leadership.

