Some key grafs:
Yesterday the Financial Times had a mostly good writeup of the stakes, which pointed out that US exports to China are “heavily focused on agriculture.” The FT said that these goods are “low value-added,” which I’m not sure is true — U.S. farming is highly productive and highly capital-intensive. But what matters in a trade war is the fact that China can fairly easily find other agricultural suppliers, buying soybeans from Brazil instead of Iowa.By contrast, the United States will have a hard time replacing many of the goods it imports from China. Furthermore, many of the goods we buy from China are industrial inputs rather than consumer goods.
So Trump has started a trade war that will disrupt our own supply chains. Remember Covid and its immediate aftermath? Remember how shortages spread through the economy and fueled inflation? Those days are about to come back, inflicting especially large damage on the manufacturing sector Trump claims he will revive.
Is the U.S. economy at China’s mercy? No. America remains a highly productive nation that could cope with even severe economic shocks if it had smart, clear-headed leadership. But we don’t.