In another APRU presentation, presidents noted the increasing integration of the cyber and physical worlds. Using artificial intelligence to innovate for the future sounds nice, but if not communicated to policymakers, it will not work as anticipated. Why not? Governments can shut down data flows. They can do so and they will do so. Government can do so by a variety of regulations that will make it difficult, complicated, expensive or even impossible to move information. Government will do so in many markets because many officials do not understand the needs of academics or companies. They do not understand the issues because the stakeholders in the system do not see that policy matters. Until and unless these exchanges take place better, we will not get the policies that make sense for everyone. Policy frameworks are not just the province of someone else—created by governments and driven by ideas drafted from somewhere else. Policy is supposed to be created for the benefit of stakeholders. But it requires that stakeholders actually participate in crafting policy.
What Does a Trade War Look Like? This is It
But, as seems to happen so often these days in Washington, by Friday, the rosy picture had changed and by this morning, the entire relationship is entering a new, much more ominous phase. On Friday morning, the White House rolled out its promised 25% in retaliatory tariff hikes against $50 billion in Chinese imported products, starting on July 6. These were almost immediately met with a list of $50 billion in products by the Chinese side. It appears that US President Donald Trump fully expected the Chinese to comply with US demands and back down, instead of responding by imposing their own tariffs on US products. When they did not, he escalated the dispute further this morning (Singapore time) by demanding an additional $200 billion in products to receive a 10% tariff when arriving from China into the United States. Raising the “ante” by another $200 billion puts China in a more difficult position. The original $50 billion in products subjected to 25% tariff rate hikes is relatively easy for China to counter. As the number escalates, China will find it challenging to apply “like for like” tariff hikes. Because the US imports more from China than China imports from the United States, there simply aren’t enough goods to keep up with matching tariff hikes. This will leave China getting more creative about how to reciprocate.
The Trade Conflict Widens: Drawing in the EU, Canada and Mexico
While our primary focus has been on the evolution of the trade battle between the US and China, the conflict has widened. Late last week, the Trump administration announced the end of a temporary stay on the imposition of steel and aluminum tariffs for the European Union, Canada and Mexico. Starting at midnight on June 1, steel exports to the United States were slapped with 25% tariffs, and aluminum with 10% tariffs. US National Economic Advisor Larry Kudlow argues that the tariffs are simply a matter of a “family quarrel,” the imposition of new barriers on trade into the US shows the spread of conflict. There are at least four reasons why this is absolutely not just a minor issue. Kudlow has said that tariffs with Canada “may go on for a while or they may not.” For the firms that are suddenly paying significantly higher prices for imported steel and aluminum, it probably doesn’t much feel like a small argument. A 25% price hike overnight is sufficient to drive firms out of business entirely. Finding new sources of supply takes time, effort and probably escalated costs.