Citation? Evidence? Data? Or are you just saying that because economic experts like Thomas Friedman have drilled it into our heads for a decade or more?
Probably the best citation is of course the classic economic text "Ferris Buller's Day Off". To quote:
In 1930, the Republican controlled House of Rep, in an effort to alleviate the effects of the… Anyone? Anyone?… the Great Depression, passed the…Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act which, anyone? anyone? Raised or lowered?… Raised tariffs, in an effort to collect more revenue for the federal gov’t. Did it work? Anyone? Anyone know the effects? It did not work, and the US sank deeper into the Great Depression.
The conventional argument goes like this: A trade war causes prices to rise because of the increased tariffs. That price rise flows thoughout the economy as the increased costs are passed on.
The increased cost of living forces a great proportion of household wealth to be non-discretionary spending, which in turn causes the economy to contract.
That contraction in turn causes companies to stop hiring, which increases unemployment.
The increased unemployment reduces demand, and the cycle continues.
All things being equal, I would agree. However things are not equal. Especially when China has been artificially pegging their exchange rate much lower than it should be for much longer.
I'm not for tariffs actually, but neither do I think 'common knowledge', especially if it's 80yrs old, has earned any right to go unexamined. Globalization and free trade are not without their problems, especially not if Grove is correct (I think he is) in asserting they've cannibalized a significant portion of our economy that both creates jobs and enables innovation.
