US tariffs will be an own goal

They will hurt US consumers and companies and are unlikely to reduce US trade deficits.

- Vikram Khanna

There is a two-panel cartoon on US trade policy that has recently gone viral. In the first panel, US President-elect Donald Trump is shown saying from a podium: "We call on the whole world to join our campaign to boycott China!"

The second panel shows a factory in China with dozens of workers making T-shirts with "BOYCOTT CHINA" emblazoned on them.

The cartoon shows pithily, at a glance - as only a cartoon can do - how hard it will be for the United States, or any country for that matter, to replace China as the factory of the world.

Trump has vowed to slap 60 per cent tariffs across the board on Chinese products and at least 10 per cent tariffs on the rest of the world.

This is hardly a way to bring manufacturing back to the US. Americans are not going to start making T-shirts, TVs, toys, clothes, electronic gadgets and the thousands of other items they import in vast quantities from China and the rest of the world.

If they try and even if they succeed, those goods would be prohibitively expensive, given that tariffs would apply not only to final products, but also to the intermediate goods needed to produce them, such as machinery and equipment, much of which are also made elsewhere.

Tariffs will also apply to imported food products from everywhere, which would push up prices for such items as seafood, fruits, vegetables, coffee, meat and dairy products which the US buys from abroad.

There is speculation that Trump's tariff threat is only a negotiating tactic aimed at striking some kind of grand bargain with China.