Trade War is Turning US Trade Profile Back to 1980s Levels and Causing a GDP Hit

Wharton professors have projected that even if the recently imposed tariffs are removed, GDP will be permanently smaller relative to having had no trade war. Extending the current trade war by several more years will lead to smaller losses in GDP in 2020 but will reduce GDP by more in the long run.

Short Small Trade War -0.1% GDP
Long Small Trade War -0.4% GDP
Permanent Small Trade War -0.8% GDP
Short Big Trade War -0.3% GDP
Long Big Trade War -0.6% GDP

A permanent small trade war takes off -0.8% GDP every decade that it lasts according to the Wharton model.

They are also showing that the trade war is returning overall tariff and trade situation in the US would be returning to levels seen in the 1980s.

In the short-run, lower openness to foreign investment flows actually boosts GDP because U.S. households provide more labor supply, which, in part, ameliorates the consequences of lower domestic capital stock in the future.

After 2019, the “no trade war” scenario has the highest GDP, but the U.S. has been in a trade war since 2018. Notice that extending the current trade war, that is, going from scenario (1) to scenario (2), actually improves GDP in 2020. In all trade wars, the consequence of a temporary decrease in openness, however, creates a permanently lower private capital stock. Even when previous openness is restored, the temporary drop in openness causes U.S. capital to be lower over the long-run and permanently reduces GDP.

SOURCES- Wharton
Written By Brian Wang,

123 thoughts on “Trade War is Turning US Trade Profile Back to 1980s Levels and Causing a GDP Hit”

  1. With what Clinton left in place each year the deficit would have when down until the budget was in the black and the national debt would have been paid off by the end of George Bush’s second term.

  2. Cutting the deficit is quite popular with Republican voters and Politicians when a Democrat is in the White House. Forget about the deficit, just cut taxes is a lot more popular when a Republican is in the White House. The only way the deficit will decrease is to raise taxes and cut spending. It’s not fair to take it out of just one side hide.

  3. No, not really; Take the case of Clinton; We never got the deficit down to zero during his administration. Some accounting tricks that will get you jail time in the private sector were used to pretend there was a surplus, but the debt went up every year, which doesn’t happen if you’re running a surplus.

    Rather, what we did was run a “primary” surplus, which is to say, we would have had a surplus if there hadn’t been interest to pay on existing debt. But, of course, there was, so there wasn’t really a surplus.

    And even that took a stock market bubble coinciding with an impeachment battle that got in the way of agreeing on how to spend the loot.

    The last time we ran a surplus by honest accounting standards was 1969. Which, I will grant, had a Democratic Congress.

  4. Lowering the deficit and paying down the national debt. Seems to be quite popular when there is a Democrat in the White House.

  5. “Just” increase the tax revenues enough to pay it down. What are you using to pay the interest while you’re doing this? More taxes?

    And just what changed in our politics to permit you to run a large, persistent surplus, when right now it’s politically impossible to not run large deficits?

  6. Yes. It is a very sad situation. We need a fair immigration and asylum policy which is enforced.
    Unfortunately- that would require herding cats through Congress, and is outside of the scope of power of President. Therefore, he is confined to only doing things which he is empowered to do- such as protecting our borders from invasions, etc.

  7. Not false. Where in Europe are there less developed countries to worry about. If you see border fences they are probably left over from the Soviet Union and Eastern Europe and they were built to keep people in not out.

    What is this about changing the goal post? Isn’t Trump talking about building a 2000 miles long 30 ft wall?

    When I heard about closed borders I hear Trump’s version, a physical wall and the army at the border to stop the “invasion” by shooting women and children.

    Because we don’t have an “open” border according to your definition since we have a fence, geographic barriers, border patrol, and check points.

  8. You can cross the Canadian border in the northwest at many point were there isn’t a CBSA to ask you questions. If you volunteer to be stopped and questioned that was up to you.

  9. You are talking to a person who grew up on a farm in Jamaica. You can farm without Winter. And you can even farm without plowing or even weeding.

    Recessions will always come but that is not a reason to speed up their arrival.

    I do agree with your statement that the recession lion is required to kill the sick and the stupid business zebras.

  10. Although I did just read an article about Swiss patrols on their Italian border intercepting migrants. So there’s that :). Lichtenstein maybe?

  11. Most are in Europe and they all have open borders.

    False. European countries have border patrols and movement enforcement. They do however allow free movement within a common block. It is very easy to Google pictures of European border fences where they border less developed countries not within their block.

    No country other than the US is talking about building a thirty foot tall concrete and steel barrier across their entire border.

    Changed the goalposts and introduced a straw man in the same sentence. Nice.

    Alright, let’s get more real. When I heard open borders, I understood it to mean a lack of immigration enforcement, including deportations, etc. All developed countries, even in Europe, try to control migration, and the European block as a whole entity certainly does. But looking it up I was wrong, that is not the definition of open borders, instead it refers to literal border crossings (movement rather than residency or walls). In that case, yes, there are a couple European countries (not all) that fit this definition. Switzerland is a good example because it is completely bordered by Schengen Area countries that it accepts free movement with. On the other hand, you clearly overshot when you said that none of the richest countries control their borders. South Korea. Done. But also various European ones, when you look at borders with undeveloped, non-Schengen area countries. I made a broad statement in response to yours, time to move on.

  12. Comparing apples and oranges.
    I’ll gladly trade southern borders with you.
    Also- yeah, you can walk right in here, but the last time I went north, the CBSA would not let me pass until they called the customer and verified that the job was warranty work.
    We should exercise similar restrictions.

  13. An human being is a pretty cheap sophisticated machine that has the ultimate abilities of self-reproduction and self-learning. Once we can build machines that are better than us, we should have the good grace to hand them the keys and go extinct.

    By the way no matter how smart you are the machine will eventually replace you any way it will just take a bit longer.

  14. Most are in Europe and they all have open borders. No country other than the US is talking about building a thirty foot tall concrete and steel barrier across their entire border. Google and find me those countries and then I will believe you. I can’t find any.

  15. Climate Change will kill many and make many suffer by 2100. The suggested solution wasn’t to de-industrialize but to shift to more effective technology. Instead of burning coal like 1800’s Europe the world should use 21st century technology like wind and solar power.

    Nigeria might be able to. Projected 2100 population is about 800 million.

  16. As the old singer once sung “If you believe in things that you don’t understand, then you suffer.”

  17. Almost all of them are like that. Filling out a paper form is no great deterrent. Remember, it is just a piece of paper. No country has the wherewithal to look for people who overstay. Also, most countries in the world cannot afford to build a thirty feet tall concrete and steel wall around their country so they don’t.

  18. So you are telling me that I can’t go from France to England without getting a visa? And that there is no way for me to go from Portugal to Spain without going thru a one year onerous process? And that there is a wall between both countries? Are there walls between every country in Europe?

    And you are telling me if I wanted to visit my relatives in Europe I would have to get a job? I doubt that since I have don’t it a few times and they didn’t ask me for my employment papers.

    I can cross from Canada to the by simple walking across the border. There isn’t a wall.

  19. Debt is easy to solve. Just increase the tax revenues enough to pay it down. Which could be done in ten to twenty years. Our current debt is a self inflected wound. There was no reason for it other than to win elections.

    The great thing about fiat currency is that it cost almost nothing to produce. And its value can be manipulate to achieve the results wanted.

  20. The world could end tomorrow. Low probability but possible. When you extrapolate one should always go with what is most probable. What is most probable in the continuous improvement in GDP per capita for China, India, Nigeria coupled with population growth and you get a projected GDP higher than the USA. Without immigrants, the USA would go into a population decline and could easily slide into someplace between fourth and tenth place.

  21. From the yelling I hear, one would think that death would be instantaneous as soon as a government tries anything to help the poor. We have being doing free education for a while now and the country has only gotten richer since then. In fact, the country only seems to get richer whenever we try to help the poor. I am beginning to believe that the secret to greater prosperity is in helping the poor.

  22. Yep, bear in mind China was unable to even build commercial quality jet engines until just a handful of years ago. Jet engines are much more difficult than rocket engines and the only players building them have been around for many decades, because it takes that kind of time to develop the expertise.

    China finally gained enough tech through espionage and whatever else, to shortcut that process and do it themselves. None of the current manufacturers are likely to have given them any as this information is considered extremely proprietary by all and sundry.

    Once China had enough, the COUNTRY’s first action was to create an enormous company, Aero Engine Corporation of China, and immediately begin their master plan to put all the manufacturers that they stole from out of business.

  23. I think he meant what leftists in this country want. For the world’s poor to settle in our country whether they have jobs or not, because they need the votes. The “open borders” of the “richest countries in the world” this person talks about is actually a reference to is the refugee policy of Western nations who subscribe to the UNHCR shaming campaign, and are allowing their cultures to die. Is China a rich nation? How about Saudi Arabia? Why are only western nations being targeted for cultural displacement?
    Because in the opinion of the members of the General Assembly, we deserve it. And many Americans believe this as well. The same people who speak about White Privilege, Post-Colonialism and Imperialism. Communists, in shorthand.

  24. I don’t know what you are arguing against, but it isn’t anything I wrote.

    In fact, you seem to be arguing against the previous comment with the same alias as you…

  25. So you want to eliminate IP protections for innovation companies?!? Why in the world would anyone take the effort, time and risk to ever develop anything if it will just get stolen and they will have no economic benefit for their hard work and risk?

    Why not get rid of ownership for your automobile or house, I’m sure that after you spent the time and money to acquire them that some nice enterprising person would love to take them off your hands. Better yet, how about you post the name and address of your company so we can come get your stuff and put you out of business?

    As for China, in case you didn’t notice one of the big hang ups is IP protection for a trade deal. They steal technologies from our hard working innovative people and have for decades, in fact they train hackers in their military for economic theft. They have no intentions of not stealing our technologies, so no trade deal. Lot’s of leverage there, huh?

  26. Maybe so. I was just pointing out that, while having your casino go bankrupt while others were doing well would be an indictment, having it go bankrupt while all those around it were, too, just demonstrates that you’re not a miracle worker.

  27. Frankly, it is not impressive to claim things are bullshit without showing that.

    That you personally know a couple of immigrants with jobs is not a good counter argument against unemployment statistics… See “anecdotal data”.

    See my previous comment regarding the economy. Your claims that it is good business for a country to pay welfare + housing for hundreds of thousands of unemployable needs references. 😀

    And so on.

  28. On case 1 I’d say no major American company anyway but but with Apple knocked out of the smart phone market for a few years I’d say there would not be all that many major companies in need to off shore manufacturing. With the latest threat to cut of Huawei by Trump if the trade talks don”t go his way, this kind of action seems more likely every day.

    On case 2 a lot of economist disagree with you on that.

  29. There are many countries that manage to have effective agriculture and farming without winters.

    Probably everything within 10 degrees of the equator would count as not having a significant winter. There are still lots of farms there that manage just fine.

    Just to be pedantic.

  30. Yeah, correction: The “December buying opportunity“.

    Though my automated dollar cost averaging didn’t take much advantage of it.

  31. That “solution” would end with no protection for intellectual property at all.

    And you’re wrong — the US have a lot of leverage to change what China do.

  32. I lived in Italy, Switzerland, US. and now I have been living in Sweden for two years. The amount of bull***t written against Sweden,it’s social system and immigration policy is amazing. The economy is strong, they have very good family policies and the government supports personal entrepreneurship (for example you own the right to patent discoveries that you develop while doing research). a couple of my daughter’s teachers were immigrants from North Africa and they were perfectly integrated.
    The immigration is integrated at every levels in the society and although the nationalist party got more votes in the last election they are still marginal and not particularly appreciated by the vast majority of the people.
    Furthermore the increased immigration is driving the housing market and the general economy. Regards.

  33. It makes me sad to think about the problems of people that go online to troll. Do those pathetic losers really have nothing better to do in life? 🙁

  34. Indeed, bribed. I suspect the current hysteria about Russia is mostly a campaign to distract from what China is up to.

    At least the Confucius Institutes are now being recognized as what they are: Spying and indoctrination centers.

  35. All of this … will possibly cause recession …

    Umm, and this is a bad thing? Recessions, lest we forget, are natural and inevitable features of every nation’s economic cyclic variation. Recessions “reset” business management focus on trimming, streamlining, fat-cutting and yes, to some degree, shaky business closing. 

    Recessions are like Winter and ploughing: killing the weeds, preparing the earth for the next Summer’s growth.  While the weeds don’t particularly like ploughing and Winter, the farmers cannot economically farm without Winters and turning the soil.  

    Businesses in time of ascent rarely grow without accumulating inefficiencies. People — even the most well meaning — tend to invent jobs that bifurcate other harder jobs into easier ones requiring more people to fill them. Recessions consolidate and eliminate the superfluous positions.  

    The “problem” is that people, individuals, are negatively impacted. And they in turn complain, often loudly, about losing their jobs, or having to handle 2× the responsibilities when their coworkers are let go.  And that gets a lot of sad-face media attention. And blame pointing. And public outcry. And bicameral power changes. Pölïtical realignments. Change. Hubris.  

    But in the end, Winter and ploughing are necessary.
    As are recessions. 

    Just saying,
    GoatGuy ✓

  36. Seriously, if it bounces back in a matter of weeks, you probably shouldn’t call it a “crash”. Or else you’re going to be calling every pothole you drive over a “car accident”.

  37. If you trust the people in power too much, they’ll abuse that trust to escape your control, reverse it to control you instead.

  38. I believe it was Warren Buffett who observed that for commodity items (he was discussing air fares) you “cannot charge more than your most insane competitor”.

    So yes, one really bad CEO can drive his own company, and his competitor’s companies, broke at the same time.

  39. It was something they didn’t do to Chinese companies though, so it was an uneven trade barrier. You know, like tariffs are.

  40. forced our companies to transfer technology,

    Err… you spelled “bribed” wrong.

    bribed our companies to transfer technology,

    It makes a fair bit of difference to the laying of blame.

  41. Sorry, I haven’t been following foreign markets, so I wasn’t aware of the USA…

    Hmmm, it looks like the big crash was December, not recently, though that bounced back within 3 months.

  42. If I owe you $1000, I have a problem. If I owe you $1 million YOU have a problem.

    China is in the latter camp re: US debt. It’s really not a problem for the USA. They’ll sell it off VERY gradually.

    edit: forgot to mention only 1/2 of iphones are assembled in China

  43. True… ‘cept I don’t foresee that India or Pakistan or especially Nigeria … is going to come up with the next-next-revolution’s million-plus intellectual invention patents, processes, technologies and supply-chain supercomputer algorithms that’ll land them more than hugely-populated-yet-terribly-impoverished overall.  

    Evil conclusion?
    No, just without blinders. 

    Just saying,
    GoatGuy ✓

  44. ‘Cept for the fact that there are a LOT of workers in ANY society that fall below the critical IQ=90 criterion. Whether we can bring it up in “polite company”, there remains a central, critical, and perhaps insurmountable core “problem” looming on the robotized horizon: the strong correlation between higher-value-jobs and higher-ranked-IQ measures. 

    That’s the hard news, the bad-smelling ape sitting in the center of the flower garden. 

    Without so-saying, the Western progressive civilization is looking to very quietly tranquilize-and-move this stinky chimp to a “paycheck-for-all” future, where the have-nots, and hard-to-talk-about can-nots are minimally payrolled to sustainable poverty-without-being-able-to-do-work.  

    As I said.
    A dâhmned hard conversation.
    Especially if you lean toward the Lıberal, politically. 

    Just saying,
    GoatGuy ✓

  45. Tho… technically, shipping is a product of volume and density (M = ρV); 

    Density of dry jeans is quite low, perhaps 0.3 kg/ℓ and the volume equally low, esp. tightly compressed – 0.5ℓ per pair. So, you could look at the 6¢/ea as 6¢ ÷ 0.5ℓ = 12 ¢/ℓ … or by mass M = ρV = 0.3 kg/ℓ × 0.5ℓ = 0.15 kg/pair … 6¢/0.15 kg = 40¢/kg. So, somewhere ‘tween 12¢ and 40¢ per ℓ-or-kg.  

    Now, when talking about a 2 horse NEMA frame 3 phase, 208 V synchronous motor (completely ubiquitous industrially), weighing in at well over 15 kg (maybe 20 or more depending on what-all is attached), well, shipping goes up. √(12 × 40) = 22 ¢/kg blended rate, for 15 kg … is $3.30 per motor.  

    Not really all that much. 

    But that shipping moves thru the product-to-market sales chain, getting multiplied each hand-off by whatever the competitive-yet-sustainable profit-margin is. That three bucks might end up as $20, $40 or even more by the time you look in the Granger catalogue and order up one. With more shipping, dutifully profitized for each hand-up. Gets pricey after awhile. 

    Just saying,
    GoatGuy ✓

  46. Simple, change our laws so that China is not protected by intellectual property ownership. China’s economy is maturing, has many brilliant people who will develop new products and services just we do do. Their economic growth will depend on it just like ours does. So, turn about is fair play. We’ll just have to hack and reverse engineer anything they invent and sell it in our markets for less money than they can produce it in China. We have the best hackers and some of the best engineers in the Western world who would love nothing better than to legally steal from a country who steals from us. Either China will be forced to change their ways or watch their GDP get siphoned off the same as they are doing to us.

    We cannot change what China does. We can change what we do with the stroke of a pen.

  47. If I have sifted through the babbling, the “respect for intellectual property rights” does seem to be a key aspect of the dispute. A mature nation should not build itself by stealing intellectual property and the U. S. is especially hurt by that.

  48. It will also be great for Vlad when he comes rolling through with his tanks. Both communists and fascists alike love to march through Poland.

  49. When you make the statement that, in 2 decades, both India and China will be have a larger economy than the US some explanation on how is due. China’s demographics are peaking now and India will continue to be India. Just saying it doesn’t make it so.

  50. Still they can’t make an autonomous truck, and truck drivers’ wages are >230% higher in the USA than in the EU, or >450% higher than in Ukraine. You still need humans in factories too. As we say: “How about that Elon Musk?”

    By the way, if Elon places his next Gigafactory in Poland near Ukrainian border, it will be great for him and for us 😀

  51. In an ideal world all nations would respect each other and operate with honor on an even playing field. Not so with China. For over 40 years they have stolen our intellectual properties, forced our companies to transfer technology, and blocked our commodities. 7 generations of presidents rolled over and accepted this on behalf of the American people – who they were supposed to be protecting…

    Meanwhile, those presidents and their economic geniuses in the Fortune 500 presided over the transfer of American’s manufacturing base to China, and they made a bundle. However, what did we get? Can you say, “The Rust Belt?” Maine Street America got raped. Our good manufacturing jobs were replaced by sales associate positions at Staples and Walmart.! And the ultimate insult is China has been using our trade dollars to build a mighty military to menace us and all their neighbors. They have never been our friends.

    Finally, we have a master negotiator in the White House who isn’t going to stand for this anymore, and if it takes a little “Belt Tightening” to make it happen, millions of us are all in for it. I have family all over America and by 2016 3/4’s of them were unemployed. Now all of them are working! There’s your “Key Economic Indicator…”


  52. Robots are the cheapest labor. Japan has 50% more industrial robots per capita than the US, Singapore has more than twice as many, and South Korea more than three times as many industrial robots per capita relative to the US.

  53. Why not open borders for cheap Chinese labor then? To make cheaper products in the USA and make US industry bigger. You don’t need to give them citizenship or foodstamps. I think, they will be happy without that too. Yeah, Americans can’t compete with Chinese in a low-skilled jobs market, but they can become managers or high-skilled workers. Not all of them though, that’s true…

  54. we’ve let our debt get too high

    But whom do you owe to? Who gave you that money, may I ask? If that money was made “out of thin air” by your own FRS, there is nothing to worry about: all of those who voluntarily used dollar as the mean to preserve wealth just have been being stupid and donated to the Federal Budget since then. The problem is that, if you even return all that money back to the FRS, they have no information about people who had losses because of dollars being devalued by the FRS. So there is no original creditor. Preserve your wealth in land plots instead 🙂

  55. Very few countries are completely monolithic in opinion.

    When they are, it’s because they aren’t really countries. For example, whenever the press mentions North Korea they should just cut-and-paste “Joffrey-want-to-be, Kim Jong-un” in its place.

    With most countries, scratch any two people in that country and you will find two different opinions, informed or otherwise, on what should be done on almost any issue. This is only unfortunate in that a lot of those opinions are in the “otherwise” category and, even among the informed, people these days (at least in the U.S.) tend to go to extremes and refuse to compromise.

    I could have been more explicit in the earlier post, but the text-length limitations on this forum tend to discourage that, although, hindsight being 20/20, I might have said something about “the current administration’s decision to oppose deliberate trade imbalances and unfair business and monetary policies, along with intellectual theft, etc.” but it does get a bit wordy rehashing this.

    Yes. A lot of people would rather eat cornbread today than consider the possibility it might cause them not to have enough seed corn to plant for next year.

    My own retirement portfolio dropped by more than a year’s salary last week, and I am not happy with the way our administration is doing things. All the same, I do agree we can’t continue to allow an emerging economic power to keep treating the international community as though it were playing cheater’s solitaire.

  56. The problem of debt (and of trade deficit) is solved with a devaluation
    of the dollar in the order of 20% (printing money if necessary), and
    a tax on real estate (not severe, about 0.25% of market value).

  57. Actually, USA is a strange country for immigration. If you can get across the border, you can get a drivers license, open a bank account, get a job, buy a car and a house, all while being an illegal immigrant.

    I don’t know any other western country that will let you do any of that without a valid visa. Its a hard shell, but soft inside.

    Just as bad, you have an immigration law called “change of status”, that can be used by illegal immigrants.
    That law also gives every immigration officer an impossible task of guessing your intent.
    I can legally enter as a tourist and then change my mind and apply for immigrant visa.
    But it is illegal to enter as a tourist with the intent to later apply for immigrant visa.
    So everytime I visit the US I risk being turned away, if the officer is lagging behind on his reject quota. (I assume they have one as part of quality control)
    Also, there are like 50 different types of visa.

    Fix that mess. Then you wont need a wall.

  58. Open borders means unrestricted travel. You’re writing about the right to settle and take a job. That may be what he meant with “open borders” and it seems to be what you meant by “open borders”, but it isn’t “open borders”.

  59. GDP is no good metric for assessing the damage done by trade wars. It’s somewhat satisfactory as an input for an estimate on revenue depressing effects, though.

    Part of the trade war damage is that if you put 10% tariff on goods from country A, your economy may buy products for 5% increased base price but no tariff from country B.
    This price increase for buying foreign goods is nothing but harm to your economy, and not properly visible in GDP stats.

  60. Economics is the Science of Predicting the Past.

    Models cannot be ‘tested’ against the future. They are only tested to see if they explain historical economic trends. So, they predict the past.

  61. Notoriously, his management of those casinos was so awful, he somehow managed to drive other casinos in the same area into bankruptcy at the same time, too.

  62. Well… It is a bit complex. My personal theory about the problem with Sweden:

    Too high trust levels. Most Swedes still can’t believe that the mainstream media, from left to right, would lie in the same way to them.

    Up until a few years ago, someone was stamped “brown” (as in fascist) in front of the whole population, for having the wrong opinions.

    A typical fascist opinion was to argue for the mainstream immigration policies of the 19090s. Or doubt that it was a good business to import hundreds of thousands of unemployable (to a population that used to be 8 million, 10 millions now, after 25 years of imports).

    So, is it a “managed democracy” if the media won’t contradict the sitting government? Is it worse than Russia or Turkey? Frankly, I am not certain.

  63. The population thing was my first reaction.

    So: Duckduck:
    Population prediction 2100

    Result: in 2100
    India 1450 M
    China 1065 M
    Nigeria 733 M
    USA 434M
    Pakistan 403 M

    So that’s 3 countries that could, assuming they catch up on everything per capita, be ahead of the USA, and one that might be pretty close.

    Assuming of course that none of the Globalwarming/silentspring/Xenoeostrogen/whatever predicted disasters ever occur, or at least aren’t particularly bad.

  64. Doesn’t the USA have to do something about the intellectual theft, anyway? That cost is going to be more than a few percent of the GNP going forward. So what else can Trump do than start a trade war?

  65. Sweden is almost there. And yes, it is insane.

    The costs for the latest few years with immigration of percentages of population that are unemployable is just being moved from the state to the county (city/”kommun”) level. Small counties are screaming in pain.

    The government just decided to allow in twice as many the coming few years. There are literally no place to house them. The general economy is going down at the same time. Health care, police and everything else have lots of problems already.

    And so on.

  66. Consequence of 1: No companies would ever want to rely on China knowing that China would sacrifice them. Long terms consequences are quite bad for China’s economy.

    Consequence of 2: Basically nothing. Rates start to go up and then Japan finds a hundred trillion Yen under a couch cushion and buys the treasuries. Japan would like to have some bonds with such high interest rates and they kind of want to devalue the Yen so its a win-win for them.

  67. I thought the liberal line was that the world was going to be destroyed by Global Warming by 2100 unless we all de-industrialize immediately. Did you change your mind again?

    Yes, and Japan was supposed to have totally surpassed USA by now instead of falling farther behind. Then it was the EU that was going to be the New Superpower (instead Europe is falling further behind). Some of us remember these predictions… Bad luck for you and your stale Baby-Boomer type ideas.

    India and China can surpass the US in GDP because of population. No other country can realistically surpass the USA in GDP by 2100.

  68. Svalbard has open borders. But it’s a frozen island in the arctic, so not that many people go there.

  69. Duh!

    What worries me is if the Trump annoys the Chinese enough they might try to take out our economy. It’s easy enough to do by the way.

    1) Stop building Apple phones and the biggest company in America would go into free fall. They’d survive but the lay-offs would be brutal and it would really tank the stock market.

    2) Selling off their US T-bills would cause the US deficiet to spike to such an extent that the Government would likely have to default. The ramifications of this are just insanely bad.

  70. Actually, to determine causality you need one of two things:

    1) The good old control group vs the experimental group.
    2) Take all the data from which various models are induced, and select the model that produces the smallest executable archive of that comprehensive set of data. See Marvin Minsky’s final advice:

    As no government in the world will permitted humans, subjected to government social experiments, to assortatively migrate to achieve consent to experimental treatment (including the “conservative” territories that stick with “the bad old ways”), #1 is out.

    So we are left with #2.

    The nice thing about #2 is that since the criterion is as about as objective as can be imagined, all the money going into endless yammering of the social sciences (such as that coming out of Wharton, not to mention the endless political yammering that only makes people hate each other) can be diverted into cash prizes for models that increase the compression ratio.

  71. barring some kind of black swan scenario, (Asteroid mining centered in the US, somebody here invents Drexlerian nanotech, that sort of thing.)

    Both those things are being discussed and at least some people are anticipating the possibilities.

    Therefore they are not Black Swans. The whole point of a Black Swan is that it is NOT a possibility that anyone was thinking about.

    Something like… someone invents interdimensional travel so we can start mines and oil wells in parallel Earths that haven’t been exploited yet.

    Cold Fusion used to be a black swan, but since Pons et al it is firmly on the (very distant) radar screen so it has now been at least briefly prepared for.

    I’m not saying that asteroid mining, drexlerian nanotech, interdimensional fracking or cold fusion wouldn’t completely change things, but that only the dimensional stuff would be completely unheard of enough to meet the definition of Black Swan.

  72. Its a serious mistake to have free trade with countries that are– not free!

    Even if China was being fare with its trade with America, it would be still be using its economic growth and scientific and technological developments to undermine freedom and democracy around the world in order for the ruling oligarchy in China to politically and economically dominate the world!

  73. yeah right, taking gambling casinos into bankruptcy six times, and running a TV reality show, is ideal preparation for running the United States economy

  74. The United States has over 6,000 warheads, China has about 300. Plus the US has recently been talking about ‘obliterating’ other countries – notably Iran and North Korea – and has effectively obliterated Iraq and Libya, both countries that had given up their nuclear weapons programs. Teddy Roosevelt recommended ‘ Talk softly and carry a big stick.’ The present incumbent inherited a ginormous great club, and keeps talking as though he’d be happy to use it. The Chinese are less verbose, but they make sure their shiv is big enough to deter muggers.

  75. Shipping is fairly meaningless.

    The figure that I do such judgement on is that the cost of moving a pair of Jeans from a warehouse in Guangzhou to a warehouse in Sydney is 6 cents. Of course you have to have an entire 40 foot shipping container of clothes to get that rate, but people DO have shipping containers full of clothes.

    6 cents is nothing for a pair of jeans. That’s the price of having another button.

    For small consumer goods, shipping is nothing.

  76. what the Chinese intend to do with 400 billion in potential exports that the US is unhappy with taking.

    Surely you mean:

    what the Chinese intend to do with 400 billion in potential exports that some people in the US are unhappy with the fact that other people in the USA are taking.

  77. It doesn’t have to be objectively true for it to feel true.
    Scientific truth is different from religious truth.

  78. Don’t forget to mention that Trump drove those large enterprises into bankruptcy through mismanagement. Only suckers pay their debts. You give the guy way to much credit.

  79. So why worry about the Chinese trade, if the party and the pla plan on destroying the US with hypersonic missiles. Sorry for me not getting worried about trading with people set on wiping us out anyway. On this, I think I will hold back my tears. 😛

  80. Anyone making a reasonable pronouncement on this has about as much probability of being accurate as any cited so-called expert.

    No citation provided, but still accurate.

  81. Name one country with a “no questions asked, come on in” immigration system. You can’t. Because they don’t exist. Because that’s insane and unimaginably stupid.

  82. I lived in The Euro. I still have family and friends there. They do not have open borders. I needed a sponsor and guarantee of employment prior to being admitted. I was also denied the prospect of social services and signed a promise to depart when my employment ended.

  83. The amount of horseshit shoveled via economists is unbelievable, and has been going on for centuries.

    Economy is very simple: raw materials + human labor + trade = “the economy”

    Nations are strong when they have a robust manufacturing base and education system to supply the engineers, mechanics, and operators.

    Trade for anything other than otherwise unobtainable goods or commodities erodes self-sufficiency.

  84. Couldn’t have said it better. My undergraduate degree was in economics and those models can say whatever you want them to. The current paradigm in economics that says free trade is always going to be better in any situation than restricted trade is not only wrong, but just lazy thinking that leads to bad policy decisions. Reality is often far more complicated than these models can show. The thinking that free markets and free trade is always the most efficient way to run an economy just isn’t true.

  85. But no jobs is even less of a solution.

    Anyway, my perspective on this is that, barring some kind of black swan scenario, (Asteroid mining centered in the US, somebody here invents Drexlerian nanotech, that sort of thing.) we’re buggered in the long term, because we’ve let our debt get too high. We’ve gotten it high enough that an improving economy will raise interest rates, and increase carrying costs, more than it will increase revenues.

    So default, the ultimate end of all fiat currencies, is in our future. You can see in the behavior of politicians that they’ve already accepted that; All pretense of fiscal restraint is gone. Nobody is pretending any more that a balanced budget, or even a shrinking deficit, is in the cards. It’s just a race to party before the card is declined.

    When that happens, our trade deficit will go to zero whether we like it or not.

    At that point it matters, and matters a LOT, whether we’re relatively self-sufficient, or dependent on imports for basic goods and services.

    Now, fortunately it has been demonstrated that, yes, we COULD drill (and frack!) our way out of energy dependency. With a bit of regulatory reform we could mine our way out of dependency on basically all extractive resources, we’re fortunate in that regard.

    I think Trump may be reasoning in this way, he’s brought large enterprises through bankruptcy before. He may be working towards the self-sufficiency that would moderate the crash.

  86. That depends on an awful lot of potential developments over the next 80 years, you realize. For instance, supposed that Musk doesn’t die of a heart attack next week? And 20 years from now the US is the center of asteroid mining?

    Suppose the current unrest in Hong Kong spreads to the rest of China, and they have a revolution?

    A lot can happen in 80 years. We’re perfectly capable of dropping into a depression and then climbing out of it back to the top, in THAT kind of time.

  87. How does all this government interference in tariffs, trade wars, etc, fit into Mises model?

    Ultra liberal no government models are as much of a utopia as communism.

  88. The Titanic was floating with a gaping hole in the hull… for a while.

    All the richest countries in the world got rich while not having open borders combined with welfare states. All they’re doing now is demonstrating that it takes a while to die.

  89. So, what you’re saying is, if you plug a trade war into a computer model that’s based on trade wars being bad for the economy, the model says it’s bad for the economy?

    Mind, I’m perfectly willing to believe that, all things being equal, trade wars are bad for the economy. Are all things equal? That’s what we’d really need to know.

    But the above? It’s just an exercise in tautology.

  90. If you want your population to earn more you have to create higher value jobs for them. Low skills factory jobs may not be the solution.

  91. All of the richest countries in the world have open borders and are welfare states. Where did you get this piece of BS from? Do yourself a favor and find another channel for your news.

  92. The Chinese will be the number one economy in the world in another decade. In two decades India will be number two. By 2100, the American economy will be fifth or sixth and only if we are lucky.

  93. Really? You should try and prove it by simple showing America’s GDP before Obama and America’s GDP after. If the difference is negative you are right. If the difference is positive you are wrong.

  94. The Chinese made a lot of the parts for American factories. With the tariffs the price of these parts have gone up and as a result the profits of American factories have gone down.

    On top of that the Chinese have reduce their purchasing of American products which further hurts the American economy.

    And the Chinese have stop investing in America and have reduce their purchasing of real estate.

    All of this will slow down the American economy and possibly cause a recession.

  95. Meh. We are doomed no matter what. Open borders, plus welfare state equals unsustainable model of governance. Add to that the current mentality, that it is central government’s responsibility to care for all people existing within our borders and we are on borrowed time.
    Time to reboot.

  96. China has actually reduced tariffs and are saying they’ll open up their financial system more as a consequence of the trade war. That is, tariffs are going down to every country EXCEPT the USA. Of course this financial opening is under capital flight pressure – there’s a ton of cash that really really wants to leave China (which then will crash their currency), so it comes across as opportunistic. Do things change back when China doesn’t need foreign cash any more?

  97. A 1.25% maximum GDP hit? Oh, how will we ever survive! /s

    Seriously, China is just a speed bump, one the US should get over as soon as possible. This is basically the only thing the the Golden Golem of Greatness has gotten right.

  98. Disagree with the text. Moving jobs back to industrial world is for the benefit of the local population.

  99. First off, in economics, as in most everything else, the only thing that is assured to be permanent is change.

    Secondly, it is going to be interesting to see what the Chinese intend to do with 400 billion in potential exports that the US is unhappy with taking.

    Excerpted from Curtis Chin, an Asia fellow at the Milken Institute, a think tank:

    Yes, it’s going to get worse before it gets better. However, tensions between China and the U.S., as well as other parts of the world, did not develop just recently and will take time to work through. It’s really reflecting an adjustment of China’s rise and how China behaves when it’s no longer that poor nation of 20, 30 years ago, when maybe some of the things it was doing were more accepted of a developing nation. As one of the world’s largest economies now, some of the things we might have accepted from a poorer nation maybe no longer fit the bill in terms of where China should fit into this region.

    But China has this tendency to think the rest of the world should revolve around them and adapt to what they want. (Yes, most countries, including the US, can be accused of this, but there are extremes.)

    Eventually, assuming we hold fast to demanding improvement, and we are really the only country that can demand that, China will need to find a way to save face. Unfortunately, our president has a very bad habit of chortling and gloating.

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