These posts acknowledge and celebrate what hitherto had been unimaginable advances of the global socio-economy. Progress has been supported by general acceptance of an evidence based rules system. The rules have proven to be sustainable in a dynamic economic political environment. The new tariff wars are challenging these rules.

Economies always function under a set of rules. Some economies function under a “need-not-be-specified” set of feral, law-of-the-jungle rules. The strongest economic agents impose rules that best serve their interest. Advanced modern economies function under evidence-based rules, the rules are generally “respected” by participants. Note generally respected does not mean a consensus, and generally respected is malleable with changing values and socio-economic circumstances.

A good set of rules has many characteristics. They are perceived to be “fair” in a general sense; they are “simple” and easily understood; they are focused on a common goal for example employment, fiscal support and or wealth; they are consistent; they are flexible and adaptable to changing technologies and or social values; and they are “enforceable”. The modern global governance system has expended much energy creating international institutions to develop and enforce the details. And, of course, there may be a government with the stature and resources to impose sanctions when needed, the policeman function so to speak. Up until recently the United States was the “policeman” after inheriting the position from the United Kingdom.

A good set of rules supports investor confidence and dampens uncertainty. It also provides a mechanism to change rules with advances society values and technologies. It provides the security to invest in global supply chains thereby spreading wealth and economic protentional. Investors can entertain multi year investments and long-terms innovation. And households can go about pursuing happiness including the consumption of goods and services and investing in themselves through education and travel.

A bad set of rules undermines all the benefits of good rules. Rules are vague and unclear, they are biased in favour of the powerful, they can be arbitrary, not evidence based, and inconsistently enforced. Wealth and economic potential is centralized to the “winners” i.e. the privileged. Bad rules protect the winners by fossilizing past social values and technologies. Strategies and tactics used by the winners to ensure that they continue to win are well known and well documented. That discussion is beyond the scope of this post.

It is understood that no advanced modern economy operates solely by Good rules, but most function with a set of rules that are good-enough to support the modern global socio-economy’s progress towards what had been unimaginable wealth, health and quality of of life.

Today’s tariff wars are attacking and disrupting the science programs that provide the evidentiary foundation for the modern trade rules. Without evidence the rules become arbitrary and ad hoc. The United States is leading the counter revolution to the modern economic system by imposing tariffs unilaterally to benefit favoured political-economic agents, reject and do not seek out contrary evidence. Resulting tariffs are perceived as ad hoc and arbitrary, not stable and can be changed at a whim. As such it undermines any confidence in the security of future investments or value chains extending beyond American borders.

Examples of delayed investments, the contraction of supply chains and the termination of research and development programs are publicly reported on a daily basis.

The major question at this point is how resilient is the global socio-economy. Trust has been destroyed by the ad hoc and anti-evidence basis of the new tariff regime.