Paul Krugman took questions from readers about trade after President Trump’s announcement of tariffs on steel and aluminum imports. Here are his answers to some of the hundreds of questions he received. — By the Editors
1. Literally every small consumer item I buy is made in China. Please explain how this came to be (and whether you think we can or should take steps to change it).
2. Should all manufacturing jobs flow to the lowest-cost, lowest-wage environments, regardless of working conditions or environmental impacts? If not, how can a free-trade system prevent this?
3. The government of China is subsidizing the growth of its electric car industry by providing very significant subsidies (about one-third of cost) to consumers. This subsidy will allow the industry to scale up much more quickly and produce electric cars cheaper than anyone else. In a free-trade world, is this good planning, or cheating? — Nick Van Kleeck, Tucson, Ariz.
Paul Krugman: 1. It’s partly a sort of optical illusion. China dominates assembly of many goods thanks to a combination of still-low wages and an extensive industrial “ecology” of supporting firms. But much of the value of the good actually comes from elsewhere. For example, iPhones are “made” in China, but China only accounts for less than 4 percent of their price.
Either Paul Krugman or Thomas Friedman does not understand the TPP. I blogged the other day about Tom Friedman: Thomas Friedman is great in this op-ed, Some things are True Even if Trump Believes Them. He writes that China is a big problem, but the Trump steel tariff hurts our allies and not China. Then: “So what would a smart American president do? First, he’d sign the Trans-Pacific Partnership trade accord. TPP eliminated as many as 18,000 tariffs on U.S. exports with the most dynamic economies in the Pacific and created a 12-nation trading bloc headed by the U.S. and focused on protecting what we do best — high-value-added manufacturing and intellectual property. Alas, Trump tore it up without reading it — one of the stupidest foreign policy acts ever. We Brexited Asia! China was not in TPP. It was a coalition built, in part, to pressure Beijing into fairer market access, by our rules. Trump just gave it up for free. Once a smart president restored participation in TPP, he’d start secret trade talks with the Chinese — no need for anyone to lose face — and tell Beijing: “Since you like your trade rules so much, we’re going to copy them for your companies operating in America: 25 percent tariffs on your cars, and your tech companies that open here have to joint venture and share intellectual property with a U.S. partner — and store all their data on U.S. servers.” “ Apparently, Dr. Krugman, there is a tariff compaonent to the TPP. Also diplomatic.