I believe your bottom-most chart of supply and demand curves contains a graphical error. Your chart shows a new supply curve as a result of U.S. tariffs on imports from China and a new lower price equilibrium. However, this is conceptually incorrect. To wit, if Chinese exports have remained stable, that suggests the supply curve has remained the same. Tariffs imposed by the U.S. have caused the demand curve to shift leftward along the existing supply curve (and, consequently, a lower price equilibrium and lower quantity demanded).
In other words, supply has remained the same but demand has decreased. As to your larger point, trade wars hurt all trading partners. If Chinese exporters must accept lower prices for the same quantity of goods, their net revenues will decline. But American soybean farmers have seen their exports collapse. There have been no equivalent stories of Chinese exporters collapsing. So while it is true that Chinese exporters will suffer some damage from the trade war, this is a 'cost' of the trade war that China is willing to pay. Is the U.S. willing to pay the 'cost' of seeing its soybean export market completely evaporate?
Oct 14
at
9:30 AM
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