Tariffs: Never say Never

Conventional wisdom: tariffs hurt those imposing them.

What if someone violates a written agreement? The dispute-resolution process is a matter of common sense. First, the parties should talk to each other. Perhaps one wasn't aware that it had breached the agreement, or the other mistook a permissible act for a violation. If talks fail, the lawyers get involved, with a mixture of threats and offers to renegotiate. Finally, the courts decide.

But what if there are no courts (with the authority to impose their decision)? Then the parties must come up with a solution that has a reasonable chance of being adhered to voluntarily.

Such is the situation that the United States is facing vis-à-vis China. It's very clear that China has materially violated the WTO agreement it signed 17 years ago.

What is needed is a change in Chinese behavior to conform to the rules Beijing accepted when it joined the World Trade Organization in 2001.

The most important issue is the demand that U.S. companies transfer their technology to Chinese counterparts as a condition of doing business in China. American businesses that want to produce or sell in China are often required to enter into a joint venture with a Chinese firm that then has access to U.S. technology....

The Chinese government acknowledges that WTO rules forbid making the transfer of technology a condition for access to a nation’s economy. But it argues that the practice is “voluntary” because American firms aren’t forced to do business in China—their other option is to stay out of the country. American companies and officials say it’s a form of extortion because U.S. firms should have access to the Chinese market, as they do to markets in Europe and elsewhere, without losing their intellectual property....

Other trade issues should be easy to resolve. The U.S. would like China to reduce its excess capacity in steel and other industries and to stop selling the resulting products on the global market at below cost, in violation of WTO rules. Mr. Trump’s tariffs on steel are a way of putting extra pressure on China to accelerate its reduction of excess capacity.

President Trump's imposition of tariffs and China's retaliatory response have raised the specter of a trade war that has spooked financial markets.

In high-school American history we had it drummed into our skulls that the Smoot-Hawley Tariff Act of 1930 brought on the Great Depression. Free-trade-good-tariffs-bad is more widely accepted than motherhood and apple pie.

Questions:
1) How come the Chinese don't buy into the free-trade mantra, i.e., they are so stupid that they impose tariffs and other tariff-like barriers to imports? Don't the Chinese see that's why they [sarc!] have been so unsuccessful?
2) Assuming talks have failed to change Chinese behavior, what are steps, preferable to tariffs, that the U.S. could take?

By the way I still am hopeful that the skirmish over tariffs is part of the overall strategy to denuclearize North Korea.