The world is walking into a global trade war. Political leaders in China, the United States, and Europe are abandoning the principles of comparative advantage and free trade. Instead, they are embracing tariffs, import quotas, and silent protectionist policies to curry favor with their respective voters.
China is by far the most egregious violator of free trade norms. China subsidizes the production of goods that it sees as strategically important, and it protects domestic production from foreign competition which offers superior value. The chairman of the Chinese Communist Party, Xi Jinping, has stated that lithium-based batteries, electric vehicles, and the solar power sector are “pillars of the Chinese economy.” China provides these industries with cheap capital and in many cases free land.
