Can you explain how that applies here? Are you saying that in the situation where China has tariffs it's optimal for the US to also have tariffs?
That's just not true. If the US government doesn't set tariffs then all the gains from trade on the US side go to the US traders. Since these people also set the price they will set it so as to maximise gains to (themselves and therefore) the US. So a US tariff can only hurt the US as a whole. This argument applies whether or not China has tariffs.
If we imagine both governments are controlled by special interests, specifically the producers of the goods whose foreign competition is to be tariffed, then it's prisoner's dilemma for those that are making decisions. (The domestic buyers of the tariffed goods suffer, but I guess we don't care about them.) I'm not entirely sure if this is what the others in this thread mean, though.
>The domestic buyers of the tariffed goods suffer, but I guess we don't care about them.
Only if we consider the first order effects -- and only if we consider them simplistically as mere consumers.
Because the wider view is that those "consumers", are also workers, and the "race to the bottom" effect of modern global trade with the developing world hurts their bottom line, and leaves them without money to be consumers anyway.
The US, and other western countries, have used tariffs to great effect throughout their capitalistic development.
this is a bit late, but hope this helps:
1 there is a standard argument for free trade, which states it is optimal for all countries to have zero tariffs (given usual conditions for such arguments).
2 there are arguments that, in certain, very special conditions, optimal for a single country to have no tariffs even if others do
3 more generally one cannot say - this is called argument of second best - and adding a tariff may make situation better not worse
