Trade Wars are Good for the Environment

in #economics5 years ago
There will be losers and winners in the trade wars; one big winner is the environment. After mulling about the recent escalation of the trade war between the worlds two largest economies, I thought this isn't nearly as bad as the media claims it to be for the USA or the world. There will be a decrease in aggregate demand in both China and USA as the result of tariffs so CO2 emissions will go down. A decrease in Trans-Pacific trade will lead to an additional decrease in carbon emissions. Hopefully, some of this decrease will be permanent as more local, sustainable options are found. It also provides more time for energy sources to be converted to renewables and improved manufacturing techniques to be implemented.


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We Don't Need More Things

Most of what the USA imports from China are cheap consumer goods; people don't really need them. The supply and demand are elastic on such goods meaning they are very price sensitive. Let's consider plastic toys as an example. Toys aren't necessary, especially plastic toys (made from oil) imported from large factories powered by coal 12,000 km across the ocean. This industry is particularly bad for the environment. Most children have many toys and they can be made locally out of wood or other sustainable products, there is no need to import toys from abroad and domestic replacements can be easily made. As the price increases because of tariffs, fewer toys will be demanded and supplied. Domestic producers in America will cover some of the deficit (hopefully out of sustainable and recyclable goods) and less will be imported from across the Pacific. Some of the tariff revenue could also be used to provide toys for unfortunate children who have none and other revenue could go to protect the environment.
USA Imports Goods Made from Cheap Labour while Exporting the Pollution


Americans import mainly electrical machinery from China, machinery, furniture and bedding, toy's and sports equipment, and plastics source of top imports none of this stuff is of particularly high quality, difficult to manufacture elsewhere or necessary for America to import from abroad. They import it from China because it is cheaper to produce in China due to lower wages, lax environmental controls and a greater supply of factory labour. Most people don't choose to live nearby plastic factories nor do they dream of working on assembly lines. Society doesn't need all this production, consumption, or pollution.

The Flipside

MON_CHINA_PKG_VIDEO_130519_848x480_1521476163920.jpg
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China doesn't import nearly as much from the USA as they export to USA. There is a huge trade imbalance and this is the reason why America has escalated its trade war with China. A trade war was happening long before Trump became president China was clearly winning so Trump fired back with the easiest and most damaging thing possible, tariffs. We have heard about currency manipulation, dumping, import/export restrictions, subsidies, industrial espionage, copyright violations, and state-funded enterprises even before China was admitted into the World Trade Organization during the Clinton administration. Global trade has never been fair, it has just become more complicated. Every country is competing with each other doing what they can to get ahead. Even in socialist Europe major car manufacturers were caught lying about their emissions to pass environmental standards. Standards which were meant to safeguard European economies more than to protect the environment as their cars passed while North American cars didn't, lies!

China Imports Crucial, Inelastic Goods from USA

China imports a lot of services from USA, agricultural products, aircraft, machinery, electronics, medical equipment and in general things they cannot produce on their own. Chinese imports have less elastic supply and demand than their exports; they aren't as easily substitutable. Many of these imports are protected by copyright laws or patents such as Disney films, while others are difficult to replicate such as Boeing planes and medicine. The tariffs won't be as effective on the Chinese side and will come with larger decreases in both consumer and producer surplus and result in even more inefficient markets. In any case, it isn't optimal for any economy to have tariffs but some fare better than others.

Conclusion

I hope the world learns that less imported plastic junk from overseas factories powered by coal is a good thing. Less consumption per American (and Westerner) is required if we are to come even close as a planet to reduce CO2 emissions and prevent drastic climate change. We need to adapt our trade habits and this latest trade war could be the catalyst the world needs to get serious about reducing CO2, we simply cannot afford to do otherwise. Donald Trump could inadvertently be the hero the world needs to reduce consumption, emissions, and reliance on international trade. #buylocal
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