"That’s the theory. Underlying that theory are the simplifying assumptions that capital and labour are homogeneous and immediately malleable to a new order. For example, manufacturing industry will seamlessly relocate to the United States from China and Vietnam because – as Krugman has argued in the past but now seems intent to distance himself from – large trading partners are characterised by similarities not by heterogeneous comparative advantages."
Yes I find it is strange why anybody would think that changes would take effect instantaneously:
The USA hikes tariffs massively, making these goods unaffordable for the locals so the overseas supply is reduced in response. Domestic production is thus invoked to fill the unsatisfied demand. Overnight.
The thing is, the USA started transferring its manufacturing capacity to the Far East from the late 70s onwards and it can't just be switched back on. For a start the production infrastructure has eroded or been torn down. Skills have been lost or never even developed.
In addition, countries like China have retaliated and the impact on US goods and services being exported will likely wipe out any dubious perceived benefits to the Americans.
A trade war looks to be underway. The pieces are up in the air and who knows where and how they will fall.
But maybe there's one thing of which we can be certain - uncertainty is here to stay for the foreseeable future.
100% Stephen. But there is an even bigger problem: the US, by all measures, is at full employment. Not only does it have to magically create overnight a skilled manufacturing workforce (China has very little unskilled manufacturing left) but it has to absorb all this relocating capacity while at full employment. Now, if it were suggesting that Chinese factories were exported in their entirety, including all their workers, it might just be possible to have them up and running in about three-four years - the shipping time + land procurement + EPA + utilities and infrastructure provision. Madness.
I suppose they could just open the borders and make use of all these willing Mexican migrants. The problem there is that these folks won't be in possession of the necessary skills.
Maybe the most likely objective of the Trump administration is that the latter is simply playing the disruptor in the hope that it will throw the Chinese off guard and that some kind of advantage will be gained out of all the chaos.
If that is the case then they are likely to be disappointed. The Chinese are stoical and they take they take the long view. The very long view. Maybe 100 years hence.
What they have been doing over the last 45 years or so, especially since Deng's economic liberalisation, has been working. Demonstrably.
They are unlikely to be moved by the actions of merely a 4 year and temporary American administration.
"That’s the theory. Underlying that theory are the simplifying assumptions that capital and labour are homogeneous and immediately malleable to a new order. For example, manufacturing industry will seamlessly relocate to the United States from China and Vietnam because – as Krugman has argued in the past but now seems intent to distance himself from – large trading partners are characterised by similarities not by heterogeneous comparative advantages."
Yes I find it is strange why anybody would think that changes would take effect instantaneously:
The USA hikes tariffs massively, making these goods unaffordable for the locals so the overseas supply is reduced in response. Domestic production is thus invoked to fill the unsatisfied demand. Overnight.
The thing is, the USA started transferring its manufacturing capacity to the Far East from the late 70s onwards and it can't just be switched back on. For a start the production infrastructure has eroded or been torn down. Skills have been lost or never even developed.
In addition, countries like China have retaliated and the impact on US goods and services being exported will likely wipe out any dubious perceived benefits to the Americans.
A trade war looks to be underway. The pieces are up in the air and who knows where and how they will fall.
But maybe there's one thing of which we can be certain - uncertainty is here to stay for the foreseeable future.
100% Stephen. But there is an even bigger problem: the US, by all measures, is at full employment. Not only does it have to magically create overnight a skilled manufacturing workforce (China has very little unskilled manufacturing left) but it has to absorb all this relocating capacity while at full employment. Now, if it were suggesting that Chinese factories were exported in their entirety, including all their workers, it might just be possible to have them up and running in about three-four years - the shipping time + land procurement + EPA + utilities and infrastructure provision. Madness.
I suppose they could just open the borders and make use of all these willing Mexican migrants. The problem there is that these folks won't be in possession of the necessary skills.
Maybe the most likely objective of the Trump administration is that the latter is simply playing the disruptor in the hope that it will throw the Chinese off guard and that some kind of advantage will be gained out of all the chaos.
If that is the case then they are likely to be disappointed. The Chinese are stoical and they take they take the long view. The very long view. Maybe 100 years hence.
What they have been doing over the last 45 years or so, especially since Deng's economic liberalisation, has been working. Demonstrably.
They are unlikely to be moved by the actions of merely a 4 year and temporary American administration.