Trade war: For countries like China, the free lunch is now history
In his 1997 article in the Journal of Economic Literature, Paul Krugman famously stated that “The economist's case for free trade is essentially a unilateral case: a country serves its own interests by pursuing free trade regardless of what other countries may do.” This statement has become a kind of rallying cry for those opposed to the trade war initiated by the current US administration; proof that the trade war will hurt American interests in the long term.
And though Mr. Krugman, a winner of the Nobel Prize for Economics chooses to stand by this statement, the trade environment in which this statement was originally made was an innocent one. It was an age when most participants complied with the rules of fair play that were established through practice rather than regulation. An environment which preceded China’s entry into the trade arena and its weaponization of trade.