一口气了解关税

Hi

Today we are going to dismantle

what can be said to be

the hottest term in the global economy

which is Tariff

Trump said

Tariff is the most beautiful word in the dictionary

Tariff is more beautiful than love

"It's music to my ear."

Meanwhile most economists

believe that tariffs will reduce the efficiency of the economy,

saying that tariffs will bring deadweight losses.

In the past hundreds of years,

economists, politicians, and the public

have been divided on tariff

arguing endlessly

What kind of chain reactions

will this seemingly simple concept trigger

in this complex macroeconomy?

What role does tariffs play

in the game between countries?

What kind of strategy is optimal?

Ultimately

are tariffs good or bad

for a country?

After gaining a more comprehensive understanding

let's take a look at the history of global trade

over the past 300 years, examining its ups and downs

I believe everyone will have

their own understanding and judgment.

First, let's take a look at what tariffs are.

For example, there is a country called Milk Tea Kingdom

next to it is a country specialised in milk powder production

called Dairy Kingdom

Milk Tea Kingdom

needs to import a large amount of milk powder from Dairy Kingdom

Normally,

milk powder is sold to consumers for 100 milk coins per barrel.

But suddenly one day,

the government of Milk Tea Kingdom

decided to impose a tariff on imported milk powder

of say 20%

In this way, the importer of milk powder

needs to pay a tariff of 20 milk coins

to the government of the Milk Tea Kingdom

for every barrel of milk powder he imports

In order to maintain his own profits, the importer

sells the price at 120 milk coins per barrel

to consumers.

This is the most basic operating mechanism of tariffs.

Let’s analyse some of the most basic pros and cons

of this tariff from the perspective of Milk Tea Kingdom

First of all, the government charges a tariff of 20 milk coins,

which is equivalent to generating income. It is a plus point.

On the consumer side, they can only

buy milk powder from Dairy Kingdom

at a more expensive price

so the effect becomes worse, so it's a minus point

For the milk powder manufacturers in the Milk Tea Kingdom

the prices of their competitors have become higher and

have been suppressed, right?

This will make them happy

that a large number of milk powder consumers will

turn to the milk powder produced in the Milk Tea Kingdom

because the milk powder in the Dairy Kingdom has become more expensive.

In this way,

the milk powder manufacturers in the Milk Tea Kingdom will make money.

Then expand production to attract foreign investment and increase employment

This is a bonus.

This is the most simplified version of tariffs

and its most direct impact.

For example, in 2018, Trump began

to impose 20% to 50% tariffs

on imported washing machines.

This was mainly because overseas brands

such as Samsung, LG, Haier

are too competitive

that they are

squeezing the space of local brands

such as Whirlpool, GE.

So what happened after this policy?

First of all, the U.S. government

received $1 billion in revenue

in the next three years.

The price of washing machines

rose by about 34%

in the next five years.

Home appliances increased by about 23% in the same period.

So washing machines prices increased by about 10% more

than the entire home appliances .

What is interesting is that

not just the prices of washing machines imported from South Korea and China

have increased.

The prices of washing machines produced by local manufacturers

have also increased

including the prices of dryers.

These price increases

are naturally borne by American consumers.

In terms of jobs,

Samsung and LG

have begun to increase

factory production in the US in response to tariffs,

including Whirlpool

has also begun to expand production scale.

It is estimated that the total

increase is about 2,000 jobs.

You see, this is

consistent with the theory we just mentioned.

Of course, this is just a small example, just an appetiser.

However, it does reflect

the direct consequences of tariffs

The government and producers have become better,

but for consumers it has become worse.

Did you notice that

tariffs, to a certain extent

is a trade-off between consumption and employment.

For example, if you increase tariffs for a certain industry,

it is equivalent to

taking part of the effect of consumers to

replenish the manufacturers of this industry.

Of course, this also includes the government.

You see, this tariff makes some people have become better and

others have become worse.

Then we naturally think of a question.

From the perspective of a country as a whole,

do tariffs make it better

or worse?

This is actually

a key factor in a country's government deciding whether to impose tariffs.

I think

it is necessary to first briefly understand

the most classic economic model.

Look at Milk Tea Kingdom, when there are no tariffs,

the total remaining area is like this

After adding tariffs, it is like this

these two small triangles are lost.

It refers to the loss in the sense of well-being for the entire population

They are called deadweight losses.

I guess you might never heard of it

Let me break it down for you in detail.

So the conclusion is that

we'll just look at the conclusion.

increasing tariff is worse off for consumers

better off for government and manufacturers

In overall there's deadweight losses, it's worse off

Let me emphasise that

this is just a theoretical framework of classical economics.

Generally, first-year economics students

will take this thing.

Textbooks will tell you that

trade liberalisation is the most efficient.

Tariffs, subsidy restrictions, etc.

are all bad and will reduce and efficiency

reduce the overall efficiency of society.

According to this classic economic model,

tariffs will bring deadweight losses

then the government should never impose tariffs, right?

This is obviously a bit too absolute and idealistic.

In reality, tariffs

still have many additional effects, which

this model does not take into account.

First, tariffs can protect the development of specific industries in the country.

It was the first U.S. Secretary of the Treasury, Hamilton,

who in the 18th century proposed a theory called

the infant industry argument

For many industries, they need to be protected in their infancy.

You can’t just look at models.

We can sacrifice some consumer surplus

to protect these industries.

In the long run,

the return on investment may be very worthwhile.

So in the 19th century, the United States and Germany

were trying their best to protect their

textile industry, steel, automobiles, etc.

moreover there's British’s divine assistance

which we will talk about in a moment,

made the manufacturing industries of the US and Germany to rise rapidly

For example, Mainland China

imposed tariff on imported cars 30 years ago

almost over 200%

coupled with vigorous efforts to attract foreign investment,

it has been supported bit by bit.

This can be said to be the infant Chinese automobile industry.

For example, among the world's major countries,

do you know which country has the most severe trade protection

or the highest average tariff?

It is

India

Since 10 years ago

Modi has implemented his Make in India plan

Although he has been subject to various restrictions from the WTO

he still does his best to raise tariffs

to protect the country's manufacturing industry.

This has also led to many countries

going to the WTO to sue him every day.

In fact, not only India, but

most developing countries now

have significantly higher tariffs than developed countries.

The main reason

is to increase tariffs to protect their key industries

Another negative consequence

is that it not only makes consumers bear higher prices.

If the imported product

is not the final product,

it will also lead to domestic downstream manufacturers in the supply chain

bearing higher costs

which affects the development of downstream industries

For example, Milk Tea Kingdom has increased tariffs on milk powder,

which will cause the price of milk powder to rise

The entire downstream of milk tea industry may be affected.

Another example is the United States,

which particularly likes to

implement trade protection on steel and increase tariffs

In 2018

Trump imposed a 25% tariff on steel

and a 10% tariff on aluminum.

This did give the U.S. steel manufacturing industry

a chance to breathe.

However, the rise in steel prices

has made prices higher for downstream manufacturers that need steel

For example, General Motors, Ford, Caterpillar, etc.

have all suffered.

Ford's CEO himself said at the time

that these steel tariffs

had cost them at least $1 billion.

So very early on, the famous economist Keynes

made a suggestion that

in order to avoid this happening,

tariffs should only be levied on manufactured goods.

The next impact of tariffs

this time the advantage

which is under normal circumstances

it will get some public support

because most people may subconsciously think that

if I import things, it means that money is flowing out,

which means that I'm benefitting others.

So if I impose tariffs to protect domestic industries,

it will get some public support.

This kind of public support

is especially obvious

during economic downturn or economic malaise.

So one phenomenon you often see in history

is that when the economy begins to decline,

trade protection becomes more obvious.

For example, during the Great Depression in the US

they implemented

very severe and extensive trade protectionism.

This is actually

one of the reasons why the subsequent economic recovery was extremely slow.

Increasing tariffs can help gain public support

and there's quite an interesting phenomenon in this

let's talk a bit about this

We know that the key factors influencing the U.S. election

are mainly a few swing states

and the unions of key industries in these states

have a great influence on the elections

Therefore, the unions in these swing states will

have a key influence on the government’s decision-making.

Therefore, you will have a vague feeling that many of these tariff policies

are beneficial to the industries of these swing states.

For example, we just mentioned that

during Trump’s first term,

a very important tariff policy targeted steel and aluminium.

It happens that the famous steel-producing state in the US

is Pennsylvania,

and the city of Pittsburgh

Steel City

Pennsylvania, happens to be

the most important swing state in the past few U.S. elections.

It can be said to be a state that plays a decisive role.

You must know that the steel union in the U.S is very large

with more than 1.2 million people

The headquarters is in Pennsylvania.

Two years ago, Japan Steel originally negotiated

to acquire U.S. Steel.

As a result, the steel union protested and lobbied,

plus some national security considerations.

Finally, on January 3 this year, Biden signed an executive order

to block the acquisition.

In fact, it is not only Trump, Biden

including Bush Jr, Carter, Reagan

have all implemented strong steel protection policies before

Of course, we cannot say that

these decisions are all because of the power of the steel union

but more or less you will find that

the key industries of

these swing states in the U.S

have a very large impact

on U.S. trade policy tariffs.

But do you know what is interesting?

Other countries

also know that these swing states are the pain points of the U.S

so they will rub salt on these wounds

Back in 2018

Trump imposed tariffs on steel and aluminium right

Canada was not happy.

He said we are going to impose tariff

on 125 products from U.S.

but he didn't actually say which products

just wait, we'll be back with the list

Two days later

they come back with a list

which is very interesting.

Look at the products they impose tariffs on

ketchup, orange juice

toilet paper, mayonnaise, etc

Feels like

why are they all unrelated

However, if you look closely

Heinz ketchup is based in Pennsylvania.

Orange juice is mainly from Florida.

Toilet paper, mayonnaise is mainly produced in Wisconsin.

Did you notice

one distinct feature here?

The tariff is mainly put on those swing states

I can only impose tariff on so much products

so I will make the best use of them

targeting your pain point

Finally, U.S negotiated with Canada

A year later, the tariffs on Canadian steel were withdrawn.

Both sides also reached a new version of the North American trade agreement, the USMCA

You see,

we have just discussed the impact of tariffs for a country

there are good and bad.

But for the opponent country,

it is basically negative.

Which is to say, tariff is not necessarily beneficial to oneself,

but it is definitely harmful to others.

In fact, what benefit does it have for the country

Tariffs can be used as

an important means of threat in negotiations.

You see, we first talked about the impact of tariffs on the economy,

the impact on the government, and the impact on people's hearts.

Another one is impact on negotiations.

If you don’t agree with me,

I will increase tariffs to make you uncomfortable

Or that between the two countries

conditions or relations are unreasonable.

If I don’t like it, I will increase tariffs

to make you uncomfortable and come to negotiate with me.

Trump really likes to do this.

I’m not sure how good he is economically,

but he is really an expert in negotiations

For example, few days ago he had a similar strategy

with the World Health Organisation (WHO)

I'll just say that I want to withdraw

it's not certain he'll withdraw

but we can negotiate a new deal

For example, in 2017,

Trump announced in a very high-profile manner that

he would withdraw from the North American Free Trade Agreement (NAFTA)

and then began to impose a series of tariffs on Canada.

Canada immediately couldn't sit still.

The counterattack we just mentioned

was also part of the counterattack here.

Then both sides began to renegotiate

and finally reached a new agreement,

which allowed the U.S to obtain more protective provisions,

especially in the fields of automobiles and agriculture.

You see recently Trump has started

talking about imposing 25% tariffs on Canada and Mexico again

I don’t know if he is really planning to do this

or if he is just putting on a show.

To be honest, I think this move is quite harsh.

So you see, tariff will damage the opponent country,

so it can be used as a bargaining chip in negotiations.

This can be considered half of its benefits.

Of course, the interests of the other side being damaged,

he will naturally fight back.

In fact, this is also

a very, very big cost in tariffs

especially in many cases,

the intensity of the counterattack is uncertain.

For example, in 1963,

U.S. and West Germany had a fight called

the "Chicken Truck War."

At that time, U.S. exported a lot of chickens,

and West German chicken farmers were not happy about it

Europe directly imposed a 40% tariff on American chickens.

As a result, the amount of chicken imported by Europe from U.S. plummeted

from $50 million

to $20 million in one year.

The Americans were immediately angry.

You blocked my chicken, I will stop your car

and impose a 25% tariff on European light trucks.

Sure enough,

the number of trucks exported by Volkswagen to U.S. has also been cut in half.

The final result is that the price

of American trucks has also increased, and the price of

European chicken has also increased.

Consumers on both sides bear the burden.

But the happy ones may be European chicken farms

and American truck manufacturers

Tariff also has another benefit

which is the one point that Trump said the most

is that it can reduce the trade deficit.

This is certainly true in theory in the short term, right?

If you increase tariffs on imports, you will reduce imports

when imports decrease, trade deficit decrease.

However, in fact, most tariffs

are targeted at a small range of goods.

For example, like what we mentioned

washing machines, chicken, milk powder, etc.

Their size is actually not enough

to compare with a country’s overall trade deficit.

But if it is really a large-scale tariff

that affects everyone

as Trump said,

then the price it affects

is not the price of one or two goods,

but the price of the entire country,

the industrial structure of the entire country , plus other

countries on the other side.

There may be large-scale retaliatory tariffs

and there is another key factor that

we have not discussed just now, exchange rate

All these effects combined

the long-term result is definitely very uncertain

In fact, have you ever thought

about why the United States has

such a large and sustained trade deficit?

Is it because it is too rich?

Or is it because labour costs are low in other countries and things are cheap ?

Or is it simply because Americans can afford to spend so much money?

Let me tell you, this problem

may not be that simple

We can talk about it if we have the chance.

Actually, tariffs also have many hidden costs.

For example, they limit the diversity of goods,

limit the exchange of international ideas, limit competition, etc.

This is actually one of the benefits of

international trade that we often mention

You can see that our table of advantages and disadvantages of tariffs

it is very comprehensive

After considering all these various

real-world factors and the overall pros and cons

the general consensus in the industry is that

if you indiscriminately impose tariffs

it will lead to losses and

more detrimental to the overall economy

But if the tariff is being imposed

in the right place and at the right time

to properly protect some of the country's early-stage industries

and stimulate employment

then it will be more beneficial in the long run.

So, tariffs are not something that

can be simply categorised as good or bad

it is a double-edged sword

But when someone like Trump says they want to impose tariffs on Canada, Mexico

and even all imported goods

many economists would step forward to oppose that.

For example, there is a very famous economist

named Krugman.

He won the Nobel Prize for his trade theory.

He believes that this large-scale indiscriminate attack

will have a huge impact on the U.S. economy.

The exact words are: "It doesn't make any sense"

"It doesn't make any sense"

Of course, he also said that

he can only analyse it from an economic point of view.

But President Trump

may have many non-economic considerations in it,

so it is not clear and it is not easy to evaluate.

Well, what we have just analysed is the pros and cons of tariffs.

This is not over yet. Based on the analysis of these pros and cons,

we know that after the implementation of tariff

who may benefit and who may be disadvantaged

we can further see

whether there is an optimal strategy

for the tariff game

between the countries

This further extends to a

game theory problem.

We know that

a very classic case of game theory is the prisoner's dilemma.

In fact, trade can also be a very similar problem.

Let me build a small model for you.

Don't worry, it's not complicated at all.

For example, if there are two countries, country A and country B,

we will simplify it

Two countries, two strategies

one is trade openness and the other is trade protection,

so there are four situations in total:

both open , both protect

A open, B protect, or A protect, B open.

In a single game,

let's now assume

the incomes of different scenarios.

If they are both open,

the incomes to both countries are +3.

If they are both protect, the incomes are both -3.

If you open and I protect, then I will take the most advantage and

my income will be +8,

and your income is -5

and the reverse is also true.

This assumption is actually very simplistic.

Don't be too serious.

Let me first explain

the setting of my income logic

I think it makes sense.

First of all, it is better for everyone to open than to protect.

Then we assume that the tariff is set

very well and very reasonably.

If the other party does not fight back,

it will indeed make the country's income higher,

But for these two countries, the overall income is greater when both sides are open

rather than one side being open while the other is protect

and better than both sides protect

Okay we are done with the assumptions

let’s briefly analyse the strategies of these two countries

For example, these two countries were open at the beginning

For country A,

if I change from trade openness to trade protection,

my income will change from 3 to 8.

If originally B is protect, and A is open .

if at this time, I change from open to protect

my total income impove from -5 to -3,

becomes better

Did you notice

if I am country A,

no matter what B is like at the beginning,

as long as I change from open to protect

my income will improve

Country A’s optimal strategy is trade protection.

In turn, country B is the same,

so they will choose to protect.

They all protect,

which is the only Nash equilibrium point under this model.

But obviously

if we treat the two as a whole,

from the perspective of overall income

they undoubtedly chose the worst outcome

and stuck at status quo

This actually fell into a prisoner's dilemma

or in our model

it is called a tariff dilemma.

So what should we do?

There is no solution.

Do we all have to stay in the worst option?

Absolutely not, there are two common solutions

the most classic one is through repeated game

the model we just mentioned is a single game

but international trade is definitely not a one-shot deal.

Everyone wants to do business for a long time

so it is a long-term repeated game.

In the case of repeated games,

Country A can establish this strategy

I will open it first, and then I will warn country B.

If you dare to start trade protection

I will immediately turn against you

In this way, as country B,

I will not have the option of trade protect while A is open

Either both protect or open up

In this case, it is open on both sides

which will become a long-term rational choice

and a new Nash equilibrium point

to achieve the maximisation of overall interests.

This strategy is the famous tit-for-tat strategy

Tit for Tat

For example, the UK

suffered the loss not doing tit for tat

In the 18th and 19th centuries, the UK was

an empire on which the sun never sets.

It was the most powerful country in the world.

It realised that trade can drive development

and wanted everyone to open

up to free trade.

Since we are an empire on which the sun never sets,

We should broaden our perspective and show some grace.

We opened the country first and lowered tariffs.

They wanted to use this method to influence people from other countries

and work with them to lower tariffs and free trade

In fact, many small countries are very cooperative and

actively open up free trade.

But there are two countries

United States and Germany.

They did not follow the British approach and

continued to protect their agriculture and manufacturing and rose rapidly

and overtook the United Kingdom in the 20th century.

This is why we just said

U.S and Germany's trades were assisted by UK

Of course, there must be many factors for the decline of the UK

but opting out to retaliate in trade

is also one of the very important reasons here.

The famous quote just now comes from a non-famous person, Xiao Lin.

It may sound a bit absolute

but I think famous quotes

have to be more absolute to be more powerful.

I just want to make it funny.

In fact, tit-for-tat is a very good strategy

in many complex systems.

For example, many animals

have some very beautiful altruistic behaviours,

including people living in society,

such as workplace, socialisation

In fact, in many cases,

you can use the tit-for-tat strategy

I open my arms first,

but I told you that

if you dare to mess with me, I will

(make you happy).

The key to this strategy

is not to just make your own decision

in silence while waiting for others to provoke

When others provoke me, I will punch

The key is to let the other party feel the threat

and let others know that you have this strategy

To put it bluntly, I am not that easy to bully.

From a theoretical model perspective

it is actually more conducive to everyone's long-term development

Back to the topic

the first way to break free from the prisoner's dilemma

or the tariff dilemma, that we just mentioned

is to play tit-for-tat and repeated game

There is another method that is also very common

which is to establish a community of interests.

Everyone can either build an organisation together

typical example is the WTO

or a more extreme one, like the European Union

or everyone can sign a long-term contract together .

For example US, Canada and Mexico

signed North American Free Trade Agreement (NAFTA)

This also counts.

WTO, which has 166 member countries,

accounting for more than 98% of the world's trade,

basically covering most countries.

Its purpose is to maximise collective interests

and avoid the prisoner's dilemma

There is also an arbitration committee here, and

if you have any violations,

they can fine you.

If you unilaterally protect

your income will not be positive.

However, many times countries

don't adhere to the WTO's rulings and fines

What should we do at this time?

We can go back to the first rule

tit-for-tat

That is, I can allow

other countries to increase tariffs on you in turn.

For example, if you impose a certain amount of tariffs on others

I will give them an equivalent amount of quotas

allow them to retaliate against you.

A very famous case here

is that the U.S and the EU have been at odds over aircraft subsidies for

twenty years.

First, in 2004,

U.S complained to the WTO

that Europe had unfair subsidies for Airbus exports

EU bit back and said that

U.S also had unfair subsidies for Boeing.

Initially, the WTO arbitrated and said that neither of you is clean

and both of you must stop these subsidies

As a result, both sides were dissatisfied

and kept arguing and no one stopped the subsidies.

Finally, the WTO took a big move and allowed them to do tit for tat

In 2019,

WTO said that the EU does have unfair subsidies for Airbus.

The U.S can have an amount of $7.5 billion per year

to impose retaliatory tariffs on goods imported from the EU.

In 2020, WTO said again

that the U.S also has many subsidies for Boeing,

so the EU has $40 billion per year to

impose retaliatory tariffs.

Anyway, each side has a fifty-fifty deal.

Finally, the two sides have become honest.

In 2021,

the two sides announced that they have to talk

Let's suspend the tariff war for 5 years

For example, the United States and Canada

Their dispute actually lasted the longest and was the largest in scale

also involved the largest number of jobs

do you know what it is?

It’s wood.

Both have been arguing since 1982.

U.S said that Canada was illegally subsidising wood.

I will impose anti-dumping sanctions on you

Canada said no, no, no, I didn't

Then Canada went to the WTO.

The WTO finally ruled that

the U.S.'s anti-dumping sanctions were unreasonable,

so it allowed Canada to impose retaliatory tariffs.

In the end, both reached a settlement and the U.S. lowered its tariffs.

In fact, there are many, many similar trade disputes

arguing all the time

But in short, tit for tat and building a community of interests

are two very important strategies.

Over the past nearly century

it can be said to have greatly promoted the development of global trade

and reduced tariffs across countries

Now we understand the advantages and disadvantages of tariffs

and have analysed some

common strategies in the game

Let’s review the global trade in the

past 300 years.

I believe everyone will be more aware of the process.

Before the 19th century,

there was actually no concept of global free trade.

It mainly consisted of

some trade transactions between Britain and its colonies around the world.

Of course, this was not considered a cooperation

but more of an occupation or exploitation

Britain has actually also followed a policy of trade protectionism in its external trade

especially for wool products.

The average tariff on finished products was 50%,

which was the highest among all European countries at that time.

Until the 19th century,

a very key figure named Ricardo appeared.

Note that he has nothing to do with Li Ka-shing.

He was an Englishman named David Ricardo

He was a very famous master of classical economics,

at that time, he proposed the theory of comparative advantage

which meant that each country should divide labour

and liberalise trade,

each doing what they are good at,

so that everyone would benefit

and it became the cornerstone of modern trade theory.

This wave of thought, along with the rapid technological advancements

ed Britain to start lowering tariffs

and engage in more frequent trade with various countries

At that time, the proportion of global exports

to the world's total GDP

increased from 5% to more than 10%.

This period was also called the first wave of globalisation

However, in this wave of globalisation,

two countries basically did not participate much

and just kept silent on their own.

As we mentioned just now, they are the United States and Germany.

Especially the United States.

Don't be fooled by the fact that the United States

or rather in recent decades, has been promoting free trade

in the early days of its establishment,

it was known for trade protectionism.

Until 1914,

The U.S. federal government’s almost sole sources of income

are tariffs and excise taxes

Hamilton, the first Secretary of the Treasury of the United States,

was the man who

proposed infant industry protectionism

He did not believe in Ricardo's theory of comparative advantage

or at least he felt that it was not applicable to the U.S at that time.

Look, after 1860,

both Britain and France lowered tariff

to less than 10%

but on the contrary, the United States

increased tariffs to account for more than 40%,

becoming one of the countries with the highest import tariffs in the world.

Between 1867 and 1900, during these three decades

Trade protection helped increase the United States' steel production

by more than 500 times

The overall manufacturing industry in the U.S was also developing rapidly

helping the U.S gradually overtake the UK

So on the British side

they only saw the benefits of free trade

Ricardo, he may have said one less thing

if one open, then the rest must open

That's why we later had

the famous quote from an unknown scholar

Time moved into the 20th century

World War I and the subsequent Great Depression

caused global trade protectionism to begin to rise.

In 1930, U.S

introduced the famous "Smoot-Hawley Tariff Act"

which increased tariffs on more than 20,000 U.S. goods

by 20% to 60%

However, what is different this time is that

Europe started to retaliate

tit for tat

and launched retaliatory tariffs one after another

The world entered a trade winter.

The United States’ imports and exports decreased by two-thirds,

and the proportion of global exports

fell back to the level of a hundred years ago,

this also heralded the end of the first wave of globalisation.

The industry generally believes that

this period of trade protectionism has greatly prolonged

and deepened the recession in the U.S

leading to an increase in unemployment in the U.S and around the world

However, on the other hand,

this lesson

is also the key to starting the second wave of globalisation.

After World War II,

almost all countries in the world suffered

the losses of the previous two decades of trade protectionism.

Under the leadership of the U.S, they finally began to sit down for grand negotiations

and signed the General Agreement on Tariffs and Trade in 1947.

The name GATT

It may sound a bit unfamiliar to you

but it has since evolved into

a well-known organization now

the WTO.

In fact, after World War II,

it is not that everyone immediately opened their hearts

and started to embrace each other.

The negotiations also went through a very long process,

and trust was accumulated bit by bit.

In 1949, the first negotiation in France,

the countries agreed to

jointly reduce more than 5,000 tariffs.

In 1951, another round of negotiations in London

reduced more than 8,000 tariffs.

By the 1960s,

the trust has actually been gradually accumulated.

The level of trust is getting higher and more open,

but there is another episode between the U.S and Europe.

What is it

the Chicken-Truck War

not an official name.

I came up with it

But overall, the process of globalisation

has been advancing steadily bit by bit.

The average tariff within GATT

was 22% in 1947.

After several rounds of negotiations

it dropped to 15% in the 1960s.

By 2000, it had dropped to only 5%

The proportion of exports in global GDP has been continuously rising

Over the course of sixty years, it increased from 5% to 25%

At the same time, along with the rapid growth of global GDP,

it has entered a golden age of globalisation.

In the past ten years, Brexit,

and a series of high-tariff measures in the U.S

and the China-US trade war

have marked

the beginning of a new round of trade protectionism in the world.

Especially after the pandemic,

many countries, whether active or passive,

have set off a wave of economic nationalism,

emphasising the protection of industry and domestic production.

Actually, if we look at the entire content today

we have analysed the pros and cons of tariffs

and the corresponding strategies

everyone should be clear that responding to trade sanction

as the country being sanctioned

from the perspective of the long-term game,

you must have trade counterattacks

and must retaliate tit for tat.

Therefore, this kind of protective sentiment

is actually extremely contagious.

It is difficult to dissipate in a short period of time and

is irreversible.

In fact, in recent years, organisations like the WTO

have also faced unprecedented crises.

Its dispute settlement mechanism is gradually paralysed.

It seems that global trade

will most likely enter a

long de-globalisation process.