Trade war 2
Trade war 2
Let's look at Ireland which has very good relations with USA because Irish Americans are a considerable percentage (9-10%). Many USA presidents were part Irish. Kennedy was all Irish. A Kennedy is in Trump's government. Ireland has trade surplus with USA almost 15% of its GDP. If this is reduced to almost 0% in 15 years, it will be only 1% each year. If it is reduced in 5 years, it would be 3% a year and in 3 years it would be 5% a year.
Ireland had very high growth rates in the past decade (2013-2023), almost 8%. But in 2023 it was -3,2% and in 2024 -0,2%. Let's assume that Ireland will have 3% growth rate without decreasing deficit with USA. We do not know how much it will be but we only give an example. If surplus with USA is reduced in 15 years, growth rate will drop to 2% (3-1). If it is reduced in 5 years it will drop to 0% (3-3) and if it takes 3 years it will be -2% (3-5).
Ireland has also a large overall surplus, 9,90%. They do not have the ability to make corrections in their deficits with other countries. So they are in very big trouble but probably Irish Americans will save them. They will try to get the best possible deal for them. That does not mean that their surplus with USA and overall will not need to be reduced. It will be done in the easiest way out of the big trouble they are in.
Other countries with high USA trade surpluses as percentages of their GDP do not have so strong diaspora (people that originate from a country) in USA. Vietnamese Americans are 0,6%. Vietnam has a little lower overall trade surplus than Ireland but still high, 5,84%. For the rest overall trade balances are; Mexico -0,32%, Taiwan 13,27%, Thailand 1,36%, Malaysia 3,01%, S. Korea 2,07%, Switzerland 7,66%.
Taiwan is also in trouble and Taiwanese Americans are even less than Vietnamese. Mexico will manage to get relatively unharmed with the assistance of Mexican Americans (11-12%). It has high trade surplus with USA as percentage of GDP but overall small deficit. So they will need to correct their deficits with other countries in order to make up for the decrease of their surplus with USA.
From Column 4 of Table B in Appendix 22, we also conclude that Macron, a NWO-EU fanatic, is a silly man and totally ignorant. France's trade surplus with USA is only 0,5% of GDP. Additionally, France will benefit from fair trade because overall it has a small deficit, 0,75%. Macron is in the front line against Trump's tariffs. He is making such a big fuss for only a one time drop of half a point in France's growth rate. He is an embarrassment for France and should be ousted the soonest possible.
Germany and Italy have almost equal trade surpluses with USA as a percentage of their GDP, 1,72% and 1.78%. It is more than France's but still not that big. Japan's is a little lower, 1,56% and Israel's even lower, 1,35%. Italian government has a reserved stance. Germany with France are in the front line against Trump's tariffs. Germans should not make such a big deal for 1,72% of their GDP and should not treat unfairly all their trading partners. Their total surplus is 5,90% roughly equal to Vietnam's.
China's trade surplus with USA as a percentage of GDP is not that big either, 1,51%. They could reduce it slowly. For instance, if it takes 3 years, it will cost them 0,5% of growth rate each year. China's overall trade surplus is not high, 1,42%. So their surplus with USA is in accordance with their overall surplus. China treats USA like all their trading partners. A trade war should be avoided, not only for not jeopardizing New Yalta Agreement. It it is too much trouble for no reason.
But if there is a trade war, it should be slow. Let's see in more detail what could happen if the trade war is fast. Domestic producers in USA will not be able to take the markets shares that Chinese companies will lose. There are two extreme positions. In one end, they will not get any of it. So, they will have a 0,47% drop in their GDP, just for that. Their growth rate would be 0,47% lower from whatever it would be otherwise .
In the other extreme position, they will get all of it and will have 1,45 - 0,47 = 0,97% increase in their GDP. This number will be added to whatever their growth rate would be otherwise. Both these extreme positions are unrealistic. What will happen is in between these positions. The more time they have, the more of China's lost market shares domestic companies can get.
For China, a fast trade war is a little worse because their exports to USA as percentage of GDP are much higher than USA's exports to China, 2,25% and 0,47% respectively. The worst extreme position is that China will suffer a 2,25% drop in GDP. The best position is that Chinese companies will take all the market shares American companies will lose in China and the drop will be 2,25 - 0,73 = 1,51%.
On the other hand, if they negotiate, they could agree a long term trade surplus reduction plan. They do not have trade surplus with USA 24,41% like Vietnam or 14,77% like Ireland. They only have 1,51% of their GDP. In addition to that, their overall trade surplus is small 1,42%. They could negotiate a 5 years trade surplus reduction plan. It will cost them only 0,3% growth rate a year which is insignificant. Russia or some other countries should intervene and stop the trade war.
We need to clarify a couple of more things. We will take our favorite trade war as an example, USA - EU. Even in a fast trade war, eventually US companies will make the appropriate adjustments, increasing production capacity and shifting production factors to other products and services. The same will happen in EU, local companies will take the market shares USA companies will lose. But for a while the harm will be done.
Can USA companies get all the market shares EU companies will lose, even if they make the adjustments? It depends on how tariffs are used. If adequate tariffs are imposed on all countries, they will take a very large part of them. Perhaps that is another reason USA imposed tariffs on all countries. If tariffs are not imposed on all countries, companies from other countries will take some of the market shares EU companies will lose.
But when tariffs are imposed on the rest of the counties as well, US producers will take the market shares other countries gained from EU. This also gives time to domestic producers to make adjustments because they will gradually take the market shares EU companies will lose. The same will happen in EU with the market shares USA companies will lose.