As a guest writer for the FT, Michael Pettis argues that tariffs will reduce global growth rather than fix trade deficits. He focuses on capital account flows rather than trade flows as the key issue in the imbalances facing the global economy.
Tariffs increase savings in a world already drowsy with too much savings _ FT Alphaville
Many economist analyze the effects of trade incorrectly. For example, last week “The Economist” stated that for the US to reduce their deficit we needed to save more. Pettis would argue that savings is a result of policies affecting consumption not a result of a population’s relative frugality.
I think Pettis’ economic views are differentiated and best explain today’s global imbalances. For those of you who want a to read more of his articles here is a link to his blog: http://carnegieendowment.org/chinafinancialmarkets. While not light reading, his focus on capital flows and their effects on economic growth and bubbles is unique. Additionally, his analysis of China is excellent and, I believe, spot on.
Thanks,
John