The World Unpacked

Fixing Global Trade: Why Tariffs and Trade Wars Aren’t Enough

20 snips
Dec 5, 2024
Michael Pettis, a nonresident senior fellow for Carnegie China and an expert on China’s economy, discusses the fractured state of global trade. He argues that to achieve freer trade, nations must implement more targeted interventions rather than relying solely on tariffs. The conversation delves into how trade dynamics have been manipulated, particularly by Germany and China, and critiques the U.S. role as the 'consumer of last resort.' Pettis advocates for a new framework akin to Bretton Woods to foster collaborative, fair trade policies.
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INSIGHT

Distorted Trade

  • The current trading system is distorted, not truly free trade, hindering its potential benefits.
  • The system needs intervention, especially from deficit countries like the U.S., to achieve proper free trade.
ANECDOTE

Germany's Trade Practices

  • Germany's labor reforms in the early 2000s led to increased profits but decreased domestic investment.
  • Instead, Germany exported excess savings, forcing trade deficits on countries like Spain and Italy.
INSIGHT

China's Surplus and Industrial Policy

  • China's large trade surplus doesn't indicate an advantage but rather masks weak domestic demand.
  • Industrial policy and trade policy are interconnected, affecting each other.
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