Trade War+Speculative Bubble=?

[Thunderbird is the word]

I'm not really an expert on economics but i'm curious; if there is another speculative bubble that bursts combined with Trump's instigating a trade war what would the economic ramifications be? Possibly a recession which made the 2008 one look minor or would the two things cancel each other out?

[Pericles]

It's bad.

[Thunderbird is the word]

Thanks, curious though and anybody can answer this; if there was a trade war with high tariffs introduced would it cause temporary pain while possibly leading to an increase in manufacturing long-term if it was permanent and reshaped the economy in such a way that it was more expensive for companies to relocate? My thought is that it wouldn't necessarily lead to an increase in jobs in the current economy but maybe more automated ones.

[ag]

Thanks, curious though and anybody can answer this; if there was a trade war with high tariffs introduced would it cause temporary pain while possibly leading to an increase in manufacturing long-term if it was permanent and reshaped the economy in such a way that it was more expensive for companies to relocate? My thought is that it wouldn't necessarily lead to an increase in jobs in the current economy but maybe more automated ones.

It will cause current pain and, of course, a restructuring of the economy, but at a lower long-term steady-state growth path. And I am not even sure there would be more manufacturing in the US, automated or not - though there may be.

Without going through the details, let me just give one reason (one of many) why things would be tough. For the last many years, the Chinese have delayed their consumption, lending to the US, in part, to make sure US can continue buying Chinese-produced goods. Well, suppose US stops buying those goods: there is no longer any reason for the Chinese to continue lending, what is, in the end, their savings. So, I am sorry guys, you will have to pay it back a bit earlier than you have thought you would have to. And if you decide to refinance the debt with other lenders, without the Chinese providing the liquidity you will have to pay much higher interest. Of course, since your debt is all in dollars, so you could, in principle, inflate out of it. But that, of course, would imply the loss of dollar´s position as an international reserve currency - implying still higher (real) interest rates if you want to borrow in the future.

So, even if you forget the (very serious) losses due to no longer exploiting the benefits of trade itself, you will be forced to readjust to much more modest living for the long term if only for this reason.

[PresidentSamTilden]

It will cause current pain and, of course, a restructuring of the economy, but at a lower long-term steady-state growth path. And I am not even sure there would be more manufacturing in the US, automated or not - though there may be.

Without going through the details, let me just give one reason (one of many) why things would be tough. For the last many years, the Chinese have delayed their consumption, lending to the US, in part, to make sure US can continue buying Chinese-produced goods. Well, suppose US stops buying those goods: there is no longer any reason for the Chinese to continue lending, what is, in the end, their savings. So, I am sorry guys, you will have to pay it back a bit earlier than you have thought you would have to. And if you decide to refinance the debt with other lenders, without the Chinese providing the liquidity you will have to pay much higher interest. Of course, since your debt is all in dollars, so you could, in principle, inflate out of it. But that, of course, would imply the loss of dollar´s position as an international reserve currency - implying still higher (real) interest rates if you want to borrow in the future.

So, even if you forget the (very serious) losses due to no longer exploiting the benefits of trade itself, you will be forced to readjust to much more modest living for the long term if only for this reason.

I got into an argument with someone online before the election about Climate change policies. I was arguing that we needed to vote for Hillary, renewables investment, blah blah blah. He was arguing that we needed to vote for Trump, because his trade policies would cause a huge recession and reduce Co2 emissions by much more. An interesting, if kinda warped, perspective. 

Clearly though, there would be a TON of domestic pain, suffering, and death if our economy tanks. It would be terrible.