We do hope someone tries to use this particularly stupid argument

We most certainly don’t want the event to happen but we would indeed love to see the argument deployed:

Over the last few weeks, however, it has started to pick up some credibility. Intelligence agencies in the US and elsewhere are now investigating the possibility that Covid-19 was created in a Chinese laboratory, and leaked out either by accident or design, and for now President Biden is keeping an open mind on the issue.

Here is the important question for the markets, however, and one no one is thinking about yet: what if it is true? It would be the biggest shock to the global economy in decades. Why? Because governments would surely have no choice but to retaliate with sanctions and demands for full-scale reparations.

Chinese goods might suddenly be locked out of the global market, creating shortages and sparking a vicious cycle of inflation. Global trade would collapse. And the financial markets would crash as Chinese money was pulled out.

Even without full-scale retaliation, confidence in China would collapse. Paradoxically, it would cause far more damage than even Covid itself - and that makes it the biggest threat to economic stability right now.

We’ve no collective nor corporate view on the origin story, we tend to leave that corner of the intellectual heavy lifting to Matt Ridley (as he divides and specialises with us on things like mineral availability). However, Occam’s Razor does lead to the idea that inadvertent release from a lab working on gain of function to make bat coronaviruses (coronaviri?) infectious in humans is a more believable story than the so far untrackable Fried Bat Soup one.

Put that aside though and the part we would like to see someone try. In order to punish these people over there we’re going to entirely upend the international trade system. This will mean great suffering for you, you here. The citizens of the US, of Europe, of the UK, will see their living standards plummet in order to really put pressure on the Chinese government. That “more damage” part means that it will slice 15 to 20% off your lifestyle.

That is, using trade restrictions, protectionism, means that we will be paying the costs of the punishment to them.

This is, of course, a particularly stupid argument. Rooted in that old mistake about trade, refusing to grasp that the imports are the aim of the entire game. The whole point being to loose our consumption on those things Johnny Foreigner does better, cheaper, or faster, than we do domestically.

We agree it’s a very common argument, it’s even a policy deployed often enough. But it’s always small in total effect. When it becomes an immediate 20% slice off the living of everyone all at the same time then the absurdity of the underlying idea should become obvious.

We are to become poorer to punish them.

The battle against protectionism is a continual one. But imagine if they actually tried it on the basis above - that would put the issue to bed for another generation, wouldn’t it? Why, we might even get the only logically defensible trade policy there is - unilateral free trade - out of the attempt.