Consequential Policy Between Generations

For some, Pre-2025 Economic Policy has more to do with long term Bad Policy Decisions than Recent Tariff Threats.

The most recent generation of trade policy arose at the end of the Cold War, reaching peak theory in 2000 when the belief that trade would eventually democratize a society was applied via open trade and Free Trade Agreements. The roots of this theory came from the progressive integration of Europe after the end of the Second World War, where former enemy nations tied their industries together in order to deter rational leaders from attacking an industrial base that was interwoven with their own economy. With the admission of China into the WTO, the early 2000s also expanded the European Union greatly as well as produced hundreds of Free Trade Agreements between individual nations, leading to eventual economic blocks and free trade zones.

The idea that trade barriers needed to be reduced worked well in theory, but if you were a smaller country outside of the EU, you were excluded and your economy was paralyzed in the European region without a direct agreement. Larger economies that were able to push for advantage also benefitted greatly. With trade barriers aligned with export policies being used since the 1950s to grow local industry in places in South Korea and Japan, China used trade restrictions to encourage international investment and manufacturing in China in order to access their growing market, while exporting at low cost abroad via the WTO trade liberalisation. This was permitted post China’s entrance into the WTO as many international companies used this situation to increase their own profits while avoiding socially responsible restrictions they faced under NAFTA regulations. Growth in international manufacturing enabled China to fund many government subsidized industries within China, exporting low cost products abroad with the help of China’s government. With the government having major stakes in all local industries, winning a commercial legal dispute against a China supported company was nearly impossible.

The existence of tariffs did not result in a frozen economy in the past. Countries like the United States and Canada did not have a free trade agreement on most goods before NAFTA, and both economies were productive and healthy during those pre-NAFTA years, even moreso than Canada is now over the last ten years. Many American and European trade agreements moved beyond a trade relationship, and were used to give added economic stability to countries bordering places like the United States and European Economic Community. The concept of a Trade War or Tariff War is not akin to a Hot War, and do not merit actions that would be taken to physically harm an offending trade partner or demand strategic support that was given willingly to the detriment of the other’s economy. As a contract between companies in two different nations would not give undue benefit to the party of one nation over the other, neither should the expectations of a more favourable position be expected by one side in a commercial trade agreement. Negotiated trade will be the only viable solution, as strategically detrimental actions will just lead to universal losses.

Before 2025, the post-Covid trade regimes already planned massive shifts as shortages of essential goods coming out of one dependent international source was seen as harmful in the event of future similar disasters. Many international companies moved from a China centered production model and took to the trend of Nearshoring their production closer to their main market. Mexico, who’s economy took a massive hit after China entered the WTO in 2001, is now able to bring back much of the manufacturing for the Americas since losing part of it in the early 2000s. While Mexico and the US are in intense negotiations over USMCA and future trade, the push for 0% reciprocal trade tariffs and an independently fuelled and supplied North America might become a beneficial trade giant if all NAFTA members can work out a mutual strategic trade arrangement with one another.

Challenging the traditional trade relationship needs to be done as a trade dispute, and not use language or actions of hot conflicts. History, location, and cultural ties make trade with certain regional partners inevitable in the worst of times, and attempting to break from this position can run the gauntlet from fantasy to foolish. Many countries wishing to break ties and using overly aggressive language look to be positioning their future fortunes on increased trade with China, but there are signs that China’s economy was already a lot worse off than imagined, with a tariff war with the US straining their economy further. Even if the US and China can come to a positive meeting of minds, China may stabilise at the level of a medium economic power, with a fraction of the economic opportunity of the US market.

Signs that China might become a less viable option when pulling away from the United States can be seen in information on Nearshoring to Mexico and now the US from companies leaving China. Self proclaimed experts on China have also discussed publicly unknown issues going on within China itself, with information being difficult to confirm at the best of times. One of the best measures of how life is for many in China is from accounts from Chinese soldiers who went to fight with Russia in Ukraine. Some of the accounts suggested that the nightmare that is the front line costs most lives, with the nearly $2000 a month pay often never being claimed as most do not survive. One account said that despite being sent into this real life Squid Game horror, he would still have gone knowing what he knows as he has nothing for him to make a life with in China. He warns others not to come, and it is unknown if he survived himself. Most of these accounts now look to be censored by China or Russia, but an economy that produces these scenarios is likely not in great shape. This was a few short years before 2025, and may be the reason why the US has chosen to pressure China on tariffs at this time. For countries hoping to move their US trade relationships towards a China focused option, they will simply tie themselves to a sinking economy over the next generation. Unfortunately, this is exactly the statements made by many G7 leaders in 2025.