People talk a lot about the inevitability of globalism...

[Bonobo]

I'd like to explore whether or not that is true with the great collection of minds here on DU.


-What would happen if we put huge tariffs on goods from countries like China which are able to keep costs low due to a falsely low currency and/or a depressingly low cost of labor?

Would it have all bad effects or some good ones too such as increasing our own manufacturing and keeping our wealth circulating domestically?

What other issues -plusses and minuses are there?

[dkf]

1. You saw China threaten economic war on Japan using Japanese Bonds.

I dare say huge tariffs will also be perceived as economic war.

[Bonobo]

2. Economic war, ok...

But what does that mean? So let's say they declare economic war... it could mean, for example, that they stop selling rare metals. But there are always other sources and surely something would ultimately be worked out.

As long as military action is avoided, surely our economies would reach some new type of equilibrium once they adjusted to deal with the new tariffs or whatever.

[dkf]

3. Same thing...unload bonds which would do some very very bad things to interest rates.

Well the Fed is buying all the Treasuries in sight anyway. Maybe they can do the same for the Chinese held bonds.

http://www.telegraph.co.uk/finance/china-business/9551727/Beijing-hints-at-bond-attack-on-Japan.html

"Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to “impose sanctions on Japan in the most effective manner” and bring Tokyo’s festering fiscal crisis to a head.
Writing in the Communist Party newspaper China Daily, Mr Jin called on China to invoke the “security exception” rule under the World Trade Organisation to punish Japan, rejecting arguments that a trade war between the two Pacific giants would be mutually destructive."

http://investorplace.com/2012/09/china-japan-bond-attack-senkaku-islands-us-bonds/

The consensus view has long been that China wouldn’t take the chance of wholesale selling off its position in U.S. bonds, since it would drive up rates and hurt the value of its remaining position. Still, the fact that this is being raised as an issue shows that such a move is in fact on the table in a dispute.

This matters for the United States because China holds $1.15 trillion of our debt, according to the most recent U.S. Treasury data, which means that it holds more than 20% of all U.S. debt held overseas. This recent article in the Telegraph shows that in any future disputes with the United States, China might not be afraid to engage in saber-rattling with its most dangerous weapon: its influence over U.S. interest rates.