How can you tell which country has the stronger economy?
Economy of scale 101: if you produce for a bigger market, you produce in greater quantities. This reduces production overheads per item, allowing you to have lower manufacturing costs per product. Also, it allows you to keep a lower profit margin per item while still earning more on the overall volume. This makes your product cheaper to the consumer, who will therefore prefer it, all else being the same.
Countries with bigger internal markets tend to have manufacturers who are producing for those bigger markets, and therefore have the lowest prices. When such big countries export to the smaller countries who don’t have such economies of scale, they can keep the prices so low, it completely suppresses the manufacturing in the smaller countries, because they cannot hope to be competitive with the technologically superior and cheaper results of strong competition on a big marketplace; it’s like introducing more highly evolved animals to some island that was geographically separated and shielded from the competition that produced better living things. In order to survive, a small country introduces tariffs to make the imported products more expensive and level the playing ground. The bigger country then complains internationally that free trade is great, freedom is wonderful, there should be no borders that separate people, and all other bullshit that is meant to increase pressure on weaker countries to remove tariffs and allow the invader’s products to dominate their markets and destroy their manufacturing industry. Once everyone’s manufacturing is destroyed, the prices will of course be raised.
I’ve been repeating for years that American whining about free borders and free trade has only one purpose, to pressure weaker countries into allowing America to flood their markets with American products, counting on the fact that nobody can retaliate and flood American markets with cheaper products because nobody can match American economy of scale, because they manufacture for a very competitive market of 300 M people. They didn’t really count on China because they saw it as basically their own offshore factory, with labor and location outsourced in an extension of American manufacturing sector’s effort to keep the prices down. What happened is of course that China learned how to make their own products even cheaper than the China-manufactured American products, while keeping the quality the same, or actually stepping it up, because where there’s manufacturing, there’s also experimentation and research that ends up evolving better technology.
That’s why Huawei is a problem for America. It is now actually a manufacturer of superior 5G technology that America cannot match. The roles have turned and now America is a technologically weaker country whose marketplace is to be conquered by a stronger country’s superior products. Also, a technologically superior country that controls the infrastructure can use said infrastructure for its own nefarious purposes if it so desires. America is used to being in that position, but as soon as it smelled the coffee and understood that China is going to replace it in this position, it started raising hell about unjust this and that and switching from a globalized free market paradigm to a “we must protect our small and weak country from stronger countries flooding our market with their products”. It’s really funny to watch.
It also explains why China is now rooting for free trade, no borders and broader international cooperation and other nonsense. It calculated that it has the technological upper hand and nobody can successfully compete with it on its own market, while it can out-compete anyone else. It’s like the osmotic pressure: you can have a porous membrane that allows two-way flow of liquid, but the liquid will always flow in the direction of lower pressure.
Trump’s statements that China is going to pay those tariffs and not the US citizens is of course a blatant lie. Of course the US citizens are going to pay those tariffs, that’s how tariffs are supposed to work. China is not going to reduce their prices for that amount, that’s impossible. The irony is, China will now benefit from all the open borders and free trade infrastructure that the Americans pushed for when they thought they will forever remain the dominant manufacturing and technological power, and they can’t just say it was all horseshit intended to collapse our borders, destroy our manufacturing sectors and make us American colonies. No, it will be “yellow man bad”.