The Pettis Paradigm and the Second China Shock

China’s leaders know this very well, of course, which is why they are unleashing a massive and unprecedented amount of industrial policy spending — in the form of cheap bank loans, tax credits, and direct subsidies — to raise production in militarily useful manufacturing industries like autos, batteries, electronics, chemicals, ships, aircraft, dro

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First, he’s threatening broad tariffs on most or all Chinese goods, instead of tariffs targeted at specific, military useful goods. In a post two weeks ago, I explained why broad tariffs are of limited effectiveness:

Broad tariffs cause bigger exchange rate movements , which cancel out more of the effect of the tariffs. Putting tariffs on Chinese-ma

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