Can we protect our own economy through tariffs ?

[Ruck]

In Victoria-II there was no real need for this, because every pop in your country would always buy goods locally, no matter what, it was just hardcoded.

No we have different markets and the prices in these markets can be different, which leads me to the question if things like the following will be possible to do:

Lets say I play Prussia and want to Kickstart my economy, Liquor seems to be a good starting branch, as I have everything needed to make Liquor available in good amounts in my home market/RGO´s. The Problem is that Russia already has a bunch of Liquor factories and they are exporting it already for a really cheap price and in big amounts. If I would build some Liquor factories now, then the price of my own Liquor would be much higher and thus, my own pops would rather buy the cheap russian Liquor instead of my own and my own factories would not be very profitable and will need subsidies from me to even survive.

So can we now in Victoria III just put high tariffs on either all Liquor from all external markets or just put a single high tariff from Liquor which comes only from the russian market ? That way we could protect our own economy, which comes with its own disadvantage of course, as our own Liquor factories cant produce yet so much Liquor and for an higher price, so that could make some of our own pops really unhappy, if we cut them off the cheap russian Liquor market.

On the other side it could also encourage them farmers to switch their job and become factory workers, because they get double the wages in the Liquor factory as in working on the field, so before we taxed the russian Liquor our farmers f.e. had access to it, but now they need to switch their job to the local Liquor factory to be again capable in buying Liquor, because of the higher wages, although this time they will be drinking Prussian Liquor.

 

[idkwhattoputhere]

Not only should there be tariffs on certain products, but it should be interesting to see differing tariffs for different nations' markets.

E.g. Lots of tariffs on the French market if you hate the French, but low or no tariffs on others such as the Russian market. That would make an interesting and more in depth mechanic too.

 

[Morrowind3]

I assume so. The vickynomics panel said economic warfare by flooding a market with cheap goods is possible, and it would be poor game design to model all this and then make tarrifs/mercantilism pointless to counter this. No idea if it's going to be on a per-resource basis though

 

[qer]

Not only should there be tariffs on certain products, but it should be interesting to see differing tariffs for different nations' markets.

E.g. Lots of tariffs on the French market if you hate the French, but low or no tariffs on others such as the Russian market. That would make an interesting and more in depth mechanic too.

That would (in real life) lead to an arbitrage situation: Russians would buy German goods (if not taxed by a tariff) and immediately sell them on the French market.

Still in game terms there probably won't be that possibility, so it could be feasible. There were also other tools to control trade (embargoes of course, but also quotas) that could be interesting to be introduced. It all depends on what type of interaction markets have between them, because the trade route capacity seems like a very big red flag .

 

[idkwhattoputhere]

That would (in real life) lead to an arbitrage situation: Russians would buy German goods (if not taxed by a tariff) and immediately sell them on the French market.

Still in game terms there probably won't be that possibility, so it could be feasible. There were also other tools to control trade (embargoes of course, but also quotas) that could be interesting to be introduced. It all depends on what type of interaction markets have between them, because the trade route capacity seems like a very big red flag .

Agreed, embargoes and such would be a cool feature.

 

[C.N.]

Sure you can "protect" your economy with tariffs. Look how excellently the Smooth-Hawley tariff act of 1930 protected the US economy.

 

[Vernichtere]

Sure you can "protect" your economy with tariffs. Look how excellently the Smooth-Hawley tariff act of 1930 protected the US economy.

Well, you shouldn't necessarily do it on all products at the same time. And you should be sure that your own writing can compensate for it quickly enough. And what is even more important: one should make sure that the other countries do not "thank" you in return.

In this respect, you should act like the good old British and tell others about free trade while protecting your own key branches

 

[Ruck]

Sure you can "protect" your economy with tariffs. Look how excellently the Smooth-Hawley tariff act of 1930 protected the US economy.

But protectionism or the british mercantilism was used very often in the 19. century. If that was good or not is of course open for discussion.
Even nowadays sometimes tariffs are used to "protect" the own economy.

Wasn´t it Trump who just recently used tariffs help the US car industry against european and asian car industry ?

 

[Vernichtere]

But protectionism or the british mercantilism was used very often in the 19. century. If that was good or not is of course open for discussion.
Even nowadays sometimes tariffs are used to "protect" the own economy.

Wasn´t it Trump who just recently used tariffs help the US car industry against european and asian car industry ?

It makes a difference whether you levy tariffs on products at will and without any point, or whether you do it in a targeted manner. In addition, you have to be able to "convince" others not to react accordingly. I have to know exactly what I'm doing there.

 

[Ruck]

It makes a difference whether you levy tariffs on products at will and without any point, or whether you do it in a targeted manner. In addition, you have to be able to "convince" others not to react accordingly. I have to know exactly what I'm doing there.

And how is someone "convincing" others to not react accordingly ? The only way I can imagine is to threat with war or maybe in a rare circumstance where the target tariff country depends a lot on a ressource from you, you could threat to raise the price of that ressource (Oil for example).

Otherwise: "You increase tarrifs on my cars for 30% ? I´ll do the same with your cars".

 

[nuarbnellaffej]

If I would build some Liquor factories now, then the price of my own Liquor would be much higher and thus, my own pops would rather buy the cheap russian Liquor instead of my own and my own factories would not be very profitable and will need subsidies from me to even survive.

I’m not entirely sure how things will work yet, but I don’t imagine that’s how it will be. Rather than buying goods directly from a global pool if local production is insufficient like in Vicky 2, the pops will only be able to buy goods available in their own market area. To procure liquor from the Russians I believe you need to have a trade agreement with Russia, as well as sufficient infrastructure links in order to actually move the goods to Prussia.

And presumably once said Russian liquors did enter the Prussian market, they would be sold at what ever the floating price happened to be at locally. By importing lots of liquor the prices would conceivably go down since the local prices are based on local demand vs local supply.

Now I don’t want to get too far into hypothetical hype territory, but for Russia to even be able to export lots of liquor, they would need to actually develop the roads, railroads, and ports that separate their liquor production regions from consumers in Prussia. Historically that was a real problem for Russia, they produced shitloads of grain in their hinterland, but had real trouble actually being able to export it to foreign buyers since their infrastructure was under developed.

 

[Vernichtere]

And how is someone "convincing" others to not react accordingly ? The only way I can imagine is to threat with war or maybe in a rare circumstance where the target tariff country depends a lot on a ressource from you, you could threat to raise the price of that ressource (Oil for example).

Otherwise: "You increase tarrifs on my cars for 30% ? I´ll do the same with your cars".

Historically, there has been a real threat of war. The Opium Wars ran under the motto of the pre-fight for free trade. Countries can be indebted, however, and the elites can be bribed. You can indirectly threaten to sanction other fields.

But that doesn't mean that everything has to be particularly rational here.

Basically, it is also a kind of spiral that can and does lead to a great war. The colonial powers, for example, blocked the colonies from competition. When all markets are distributed, the contradictions must be resolved.

In the game, I would actually like to have an option to request a tariff cut.

 

[Sparticulous]

Sure you can "protect" your economy with tariffs. Look how excellently the Smooth-Hawley tariff act of 1930 protected the US economy.

Tariffs usually work and worked great for early germany. Hoove made a poor choice in that one instance as most of the world was in recession. Hoover made even a worse choice when he launched the army against a peaceful veteran protest and massacred many

 

[nuarbnellaffej]

It remains to be seen how a tariff system would actually affect the in game economy, and whether or not it could actually achieve the same results as they can irl. But if implemented they would raise the prices of goods in a given market that was importing them. As has been stated in the slides, high prices benefit producers and hurt consumers.

So in theory raising the price of a good in a market by taxing the imports would benefit the local producer since the factory’s wages(and profits) would be higher, but it would be at the detriment to basically everybody else.

I know there will be factors that lead to competitive advantages in game vs different regions/nations, so I could see implementing a tariff on an industry you are trying to get off the ground or protect for autarchy purposes as a viable option. Though you could achieve the same thing with subsidies.

The way Vicky 2 worked, tariffs were (I think) really only an additional method of generating state revenue, and wouldn’t really “help” your local industry, in fact it would hurt them since they often times have to import raw materials.

 

[Istaego]

Non sono ancora del tutto sicuro di come funzioneranno le cose, ma non immagino che sarà così. Piuttosto che acquistare beni direttamente da un pool globale se la produzione locale è insufficiente come in Vicky 2, i pop saranno in grado di acquistare solo beni disponibili nella propria area di mercato. Per procurarsi alcolici dai russi credo che sia necessario avere un accordo commerciale con la Russia, oltre a collegamenti infrastrutturali sufficienti per spostare effettivamente le merci in Prussia.

E presumibilmente una volta detto che i liquori russi sono entrati nel mercato prussiano, sarebbero stati venduti a qualsiasi prezzo fluttuante fosse localmente. Importando un sacco di liquori, i prezzi sarebbero plausibilmente diminuiti poiché i prezzi locali si basano sulla domanda locale rispetto all'offerta locale.

Ora non voglio addentrarmi troppo in un ipotetico territorio di campagna pubblicitaria, ma affinché la Russia sia in grado di esportare anche un sacco di liquori, dovrebbe effettivamente sviluppare le strade, le ferrovie e i porti che separano le loro regioni di produzione di liquori dai consumatori in Prussia. Storicamente questo era un vero problema per la Russia, producevano carichi di grano nel loro entroterra, ma avevano grossi problemi a essere effettivamente in grado di esportarlo ad acquirenti stranieri poiché la loro infrastruttura era sottosviluppata.

Maybe you're right. But what then is the goal of opening the market? if you are right, you do not earn anything other than the chance to get a commercial treaty later on.

 

[nuarbnellaffej]

Maybe you're right. But what then is the goal of opening the market? if you are right, you do not earn anything other than the chance to get a commercial treaty later on.

I’m not sure which specific market you are referring to, but in the Prussia/Russia example, as Prussia you would have a wider market in which to sell your products into, while also having more sources for inputs(like raw materials, iron, coal, grain, fruit etc..). You might also get access to luxury consumer goods your pops want that may be too much of a hassle if not outright impossible to make domestically(regional goods like tobacco and chocolate come to mind.)

We don’t know enough about the game yet to say anything concrete, but there are lots of potential benefits, economic like I’ve listed, as well as political and diplomatic.

 

[Vic3FanAccount]

Sure you can "protect" your economy with tariffs. Look how excellently the Smooth-Hawley tariff act of 1930 protected the US economy.

That is not the discussion. The player should be able to "protect" with tariffs their economy, if it is a good choice its another discussion.

It's like saying comunism shouldn't be in the game because it doesn't work (or capitalism, or whatever, you get my point).

 

[EUnderhill]

Sure you can "protect" your economy with tariffs. Look how excellently the Smooth-Hawley tariff act of 1930 protected the US economy.

You can protect the rent-seekers, however.

 

[nuarbnellaffej]

That is not the discussion. The player should be able to "protect" with tariffs their economy, if it is a good choice its another discussion.

It's like saying comunism shouldn't be in the game because it doesn't work (or capitalism, or whatever, you get my point).

Well it does matter if you want the effects in game to be realistic, but he is going too far and throwing the baby out with the bath water. If you were to shove through massive across the board tariffs in game you should get similar results. But more targeted and reasonable tariffs might be a good way to push up the local price of something you want to make more of so that said factory will be more profitable and can expand.

There are plenty RT of historical examples where tariffs did succeed at growing a specific industry at the expense of consumers, but sometimes that is worth it. Like if you’re worried about some import being cut off during a war, and you want to maintain domestic production for that reason.

 

[Fabiondo]

tariffs definitely can be used to protect the national industry. the economic consensus now, however, is that free trade provides more net benefits in the long run.

still, I want to able to RP as northkorea and have my pops produce all of their own cars, food, movies, tv, furniture, etc