SciFrog:
In a trade war, everyone looses but large exporters will loose more.
Even though it might sound logical it is incorrect... Just consider the following (simplified) example:
- US buyers of European cars buy these cars for a reason
- Now we make these cars from the EU more expensive
- As a consequence, the US buyer might then buy the inferior product (a product he did not want to buy before)
- Consequently, the pressure on US car producers to improve their products will reduce, at the same time they can increase prices
- As a result the US car buyer pays more for even lower quality, for a car he was "forced" to buy by his "president"
- At the same time, international car makers are forced to get better and better making their products competitive at even higher prices (given the temporary tariffs)
- The longer the tariffs are applicable the weaker the US car maker will get relative to its international competition and in the end it might be finished when the markets are opened up again after Mr T went home or to prison; the international car makers will then retaliate and put severe pressure on the US car makers that are even less competitive than today
- In the meantime, the US buyer also has less money for other purposes which will hurt other US products the buyer can no longer purchase as he now paid more for a car he did not want to buy before (the potentially higher dividend of the US car maker - following from reduced competitive pressure and higher car prices - will get distributed to the international shareholder base, some of the shareholders might live in the US and spend the higher dividend, of course)
P.S.: The above example illustrates why there are no reputable economists who argue in favor of tariffs or other trade barriers