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One topic that I was thinking about lately is regarding tariffs and some sort of hidden cognitive dissonance behind the whole policy. It seems to be a clash of different type of worldviews, one being the so called industrial policy, which is a policy where a nation creates favorable environment to grow domestic behemoths and grow their domestic economy. There are multiple examples of countries employing this type of policy such as South Korea, China or even Japan back in the day.
On the other side of the spectrum you have standard economic theory in favor of free trade. It has formidable range of theories for why this is ultimately the best policy, the most important one being the concept of comparative advantage.
Now to get back to the cognitive dissonance stuff, there is one huge question. If you are in the latter camp where you oppose tariffs and trade regulations - why are these people not against retaliatory tariffs? From this standpoint it seems as if you are shooting yourselves in the foot. If USA imposes tariffs on some goods like steel, then you can actually take advantage of that in free trade framework: buy state subsidized steel from USA to build your own infrastructure and factories for cheap, and then use this advantage to sell things you produce back. And even if USA decides for some broad tariff regime, it still enables you to use this advantage to sell goods to other countries. Under this framework the only country punished should be USA and the rest of the free trade world should be winners.
The other side of the cognitive dissonance is that in fact at least during last few decades a lot of economists are actually pro industrial policy. You can easily find articles like these where protective measures are praised. The same goes for EU, which explicitly aims to subsidize certain industries.
I think that the most interesting example here is China, which especially subsidies the basic production capacities: energy, steel, concrete, basic chemicals etc. These basic commodities tend to "supercharge" the rest of the economy, mostly as they are hard to transport and thus create at least local monopolies. It also benefits and/or suffers from so called double marginalization problem, as costs of goods at the bottom of supply chain propagate positively/negatively throughout the rest of the economy. Moreover creating complete supply chain in certain place increases intangible "know how". You can then have experts on the whole supply chain working collaboratively with each other to produce superior goods cheaper. Think of Detroit being the old car hub or Silicon Valley as a hub for software or Hollywood for entertainment industry.
To be frank I am leaning more into industrial policy side now, especially since COVID-19. Noah Smith has an article defending such a policy for national security reasons. But in the end with how complicated the supply chains are, this becomes almost an impossible conundrum. Just take chip production issue: you have to have mining facilities for pure silicon and other valuable minerals. Then you have to have companies designing new chips in research labs. Then you have companies capable of producing highly sophisticated lithographs capable of producing high-end chips, such as ASML in Netherlands. Then you have to have companies capable of producing said chips such as TSMC in Taiwan. The whole system is very fragile and even one of the chains in the links proves security risk. The same goes for pharmaceutics or other technologies.
I am against retaliatory tariffs. They are in fact shooting yourself in the foot.
1930s was the last time everyone went all in all retaliatory tariffs and it basically wrecked the world economy.
There are always economists in favor of bad ideas. They still can't even agree on the minimum wage.
What you'll find with economists that support bad economic policies is that they'll point to a paper or theory that justifies it in a very convoluted way. There are papers out there that justify minimum wage and tariffs, but they require a perfect set of market conditions and a government run exactly to the specifications of these same economists.
The most famous example of protective industrial policy in the US is the Jones act. It is stronger than a tariff because it represents an absolute ban on foreign products in certain categories. It has been a total failure. The US has instead just crippled its domestic shipping, impoverished its own people, and all it has to show for it is a sclerotic ship building industry.
Other countries like Brazil and India have also been trying to industrial policy themselves into success for a few decades. They've also only managed to further impoverish their people.
There is no cognitive dissonance. Just bad economic policy that we will trick ourselves into every few decades.
At least in the case of India, we've emerged from crushing poverty largely due to late 80s and early 90s liberalization and movement away from mercantilist policies.
Recently, there's been an effort to reduce the attractiveness of cheap Chinese imports through tariffs and subsidies of domestic industry, and the jury is out on their effectiveness. We'd have congenial relationships with China if they weren't so myopically focused on Arunachal Pradesh and random mountains in the Himalayas. It makes me sigh when I realize how much of the international opprobrium China faces is entirely due to its own weight throwing, for very little potential gain in this particular case.
Chinese foreign policy is a bit of a throwback in that it's strongly driven by concrete strategic military goals, AIUI -- if they care about the random mountains, it's because they think that they are useful in an all-out war. Same with Tibet, same with Taiwan.
The issue is that there wouldn't be any need for an all out war, at least with India.
The Himalayan mountains mean a lot more to us than they do to the Chinese. They're literal high ground, covering the flat and very hard to defend Gangetic plain. In a shooting war, neither sides could actually make much territorial ingress, the logistics wouldn't work for moving the millions of troops necessary. Even aerial warfare and artillery duels wouldn't really change the picture, not when the largest mountain range in the world has had its say.
India recognizes Chinese control of Tibet, and our sheltering of the Dalai Lama is inconsequential. The Tibetan secessionist movement is just about dead. We never contested ownership of that godforsaken place, beyond a short lived backing of guerilla movements that ended in the 70s.
Arunachal Pradesh was never Chinese, at most it alternated between tenuous control between Indian kings and the Tibetans. Even when China seized control during a war with India, they voluntarily withdrew after a cease-fire.
If China didn't press these territorial claims, then it could easily exist as a neutral power that happened to have an overlapping border with India. We're not territorially expansionist, and we've had congenial ties with the rest of our neighbors, barring the obvious exception in Pakistan (and even then, they were the ones who instigated most conflict). It would be very easy to live and let live, and enjoy warm trade relationships. That is hard to do, at best, when one party considers over a million people to be their rightful citizens, for no good reason.
China doesn't see it this way, so none of what else you say matters -- if there's a possibility that a war might occur, they want to be in the best possible position for it.
Like I said it's a bit of a throwback to pre-WWI international relations, but you see it a bit in Russia's adventures in Ukraine. Happens when high-ranking military officials get a direct voice in diplomacy.
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