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PaperclipPerfector  22d ago (text post)   32375 thread views

Culture War Roundup for the week of April 7, 2025

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Handwaving Freakoutery: Woke Tariffs - Wherein the United States suffers an outbreak of Critical Trade Theory

Also, what math educator Matt Parker calls "mathiness."

The Great Awokening of the prior decade was founded in part on the False Cause Fallacy. Our major institutions for the better part of the last ten years were operated by wokerists, who used an Intersectional Matrix of Culturally Encouraged Race and Gender Prejudice to counteract what they viewed as hidden unmeasurable forces such as “systemic racism.” They couldn’t point to the systemic racism, but they knew it must be there because of the imbalance in socioeconomic metrics, and they denied any other possible explanation for the imbalance. Once the False Cause was in place, the devout wokerist was forced to fight the hidden prejudice with overt reverse prejudice, because they couldn’t conceive any other cause.

...

The idea of a “reciprocal tariff” sounds tough, and fair, and based, and go-America-punch-flag-eagle, and in concept could be pretty popular if sold in the proper way to the voting base of the United States. It’s certainly “unfair” when some countries tariff our goods to protect their own industries while we don’t tariff their goods to protect our industries. It certainly seems reasonable to treat other countries in the same way they treat us. But are the value of other countries' goods artificially depressed because their businesses don’t have to pay for health insurance for their workers? Or because their workers ride public transportation and don’t need cars? Or their goods are made by child slaves? Or so forth?

...

[Image of "reciprocal tariff" formula]

Let’s walk through this. 𝜏 is the tariff. ε is the price elasticity of import demand, ϕ is the elasticity of import prices with respect to tariffs, m is imports, and x is exports. If some smooth-brain were to set ε equal to the inverse of ϕ, say for instance at something like 4 and ¼, then those cancel and the tariff is just [trade deficit] divided by [imports]. It has nothing to do with how much they tariff us, and everything to do with how much stuff they ship us and how little we ship them. And this is exactly what Trump did:

[Graph of predicted vs actual tariff]

The amount they tariff us doesn’t even show up in the equation. There’s nothing “reciprocal” about it, unless you presume that all trade imbalance between two countries must be de facto evidence of systemic unfair trade practices. Critical Trade Theory. Wokery all over again, applied to international trade. There’s no possible reason that Cuba could grow a better banana than East Atlanta, right?

Math educator Matt Parker also made a video about the formula, criticizing it as "mathiness:" Superficial use of a mathematical formula to make something look well reasoned. He's not an economist, so he rightly didn't go very far with this criticism, but he cited a study on the effects of the 2018 trade war to show how complicated demand elasticity is, then pointed out that asterisks aren't even a "proper" multiplication symbol, they're just what's used on a qwerty keyboard. Is there any good economic analysis showing that ε is equal to the inverse of ϕ? If so, why isn't it being publicized by the WH? If not, why bother including them in the formula?

And what's the deal with "Critical Trade Theory?" Are trade deficits a good way to measure non-tariff trade barriers? If so, how? If not, why is the WH doing it?

It's technically true that Trump's 'retaliatory' tariffs aren't actually retaliatory, as most countries don't have tariffs on vast majority of US imports. However, there are other actual, tangible non-tariff trade barriers countries use, it's not just illusory 'Critical Trade Theory'.

Tariffs are considered archaic and stupid in our global WTO liberal free trade regime. But occasionally (or sometimes more than occasionally) states want to engage in protectionism. The way they get around this is by implementing non-tariffs trade barriers that have plausible deniability with other justifications. This is sometimes described as neo-mercantilism in academic literature. The European Union loves this, from geographical indicators to carbon border adjustment mechanism and other regulatory measures - all implemented for other goods, that just so happen to also protect their domestic industries as well (unintended side effect, of course). Though, the EU will sometimes resort to tariffs on short notice as well, such as to prevent Chinese state subsidised EVs flooding European markets - but that's justified as an anti-dumping measure - purely self defence.

And China bans imports of goods, out of deep concern for the safety of their citizens. They blocked imports of Australian rock lobster because of high levels of cadmium (no evidence ever confirmed) and periodic bans of imports of either Canadian or Australian canola over concerns of blackleg fungus contamination. Of course, China too used extortionate tariffs on Australian barley to protect themselves from Australian 'dumping' cheap barley in China. Damn, us pesky Australians! First we try to poison the Chinese with toxic lobster, then we try to destroy the domestic Chinese barley market! In a weird coincidence, concerns about cadmium disappeared the same time relations normalised with China post-COVID! What luck! And don't forget the China rare earths export ban and dispute in 2010-12, which was for the good of reducing pollution and conserving the resource. The fact it happened after a major maritime and diplomatic dispute with Japan is a coincidence, I'm sure.

For better or worse, Trump's approach is about as unsophisticated as you can get, just slapping tariffs on just about everyone and everything. See, in the enlightened WTO free trade order, you can't just put tariffs on things, that would break WTO rules and free trade principles! No, instead what you're meant to do is provide some really-justified-for-other-reasons non-tariff measure to block export or imports, and then spend the next 5 years rules-lawyering how it doesn't violate the 'international rule based order' after which time the outcome of the dispute doesn't even matter, if someone even bothers to challenge it, that is.

geographical indicators

The geographical indicator row is not primarily a protectionist one - the EU is demanding that other countries protect geographical names so that (for example) American winemakers can't call their Champagne-style sparkling wines "Champagne" in the US domestic market. The GI row is analogous to IP rows which end up as a bargaining chip in trade negotiations.

The geographical indicator row is not primarily a protectionist one - the EU is demanding that other countries protect geographical names so that (for example) American winemakers can't call their Champagne-style sparkling wines "Champagne" in the US domestic market.

This sounds exactly backwards to me, though maybe I missed something. As far as I know the EU doesn't give a flying fuck what you call sparkling wine in the US, it just won't let you sell it as "champagne" in Europe. Though you're right it's not particularly protectionist, or if it is, it's regional protectionism, because European sparkling-wine producers are subject to the same rules (you can't make sparkling wine in Spain, or even other regions of France, and call it "champagne").

You are correct, it's protecting EU domestic markets from foreign 'similar' products from using the geographical indicators (although the EU has occasionally managed to extend that protection to other markets). So Australian sparkling white wine can't use the name 'champagne' in European markets. This was a major sticking point during fairly recent Australia-EU Free Trade Agreement negotiations (Australia is a major agricultural exporter), particularly around products like feta, parmesan, prosecco, and was instrumental in the collapse of negotiations along with other agriculture protectionist policies. Now, one might think it's fair for the Europeans to do this to protect their cultural culinary heritage - I wouldn't disagree. But it does still provide a non-tariff trade barrier (i.e. is a protectionist policy) against potentially more competitive imports.

But it does still provide a non-tariff trade barrier (i.e. is a protectionist policy) against potentially more competitive imports.

I mean, I just feel like... every regulation, including fraud and food safety, is a protectionist policy against potentially more competitive imports, isn't it? If you have too much arsenic in the imported orange juice or whatever, then if the customer would usually not notice this immediately and correct course, then the restriction on selling the orange juice is, from a pure market perspective, a trade barrier against competition. I think at some line, and arguably "champagne from Australia" is across that line, you have to say "no, fraud is not legitimate competition actually."

To a degree, yes, you're correct, it's just then which regulations or protections are generally considered legitimate, and don't hinder the 'spirit' of free trade. Although with health and safety regulation specifically is that they're competing on an even playing field in that specific market with domestic goods - this isn't the case with all (most) non-tariff trade barriers, which often put additional burdens on imported goods that domestic goods don't have to meet, or are structured in such a way to make it far easier for domestic goods to meet the requirements.

That's a good metric!

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