An unfortunate policy of the past few years was the unilateral imposition of tariffs, on friend as well as foe, in a seemingly haphazard fashion. The deleterious effects of them were partially mitigated by working out individual trade deals with the countries targeted, but those deleterious effects were far from eliminated.
The pandemic will, unfortunately, give enormous added impetus to those seeking to restrict international trade, on the grounds of national security/health needs. It's likely there will be regulations imposed to stimulate the domestic production of pharmaceuticals, in view of both threatened and actual export restrictions on same imposed by other countries, most recently by India.
I am sympathetic to the need to develop domestic sources of supply for critical pharmaceuticals, so that the US will not remain dependent on foreign sources which can easily be terminated when most needed, but I'm concerned that narrowly-targeted regulatory restrictions might snowball into broader trade restrictions which severely curtail international trade flows. This was what happened to Hoover's initially narrow tariff proposal on agricultural products, which evolved into Smoot-Hawley. Were it to come about, it would have disastrous consequences for the economy, for equities, for all but the most credit-worthy fixed income investments, and for most commodities and hard assets.
Published by: Skip Cooper