Are AI import trade routes to you a good thing? If not, can you deal with them somehow?

[delta180]

I am playing the USA, with free trade law and I notice that GB is buying a bunch of my steel in a trade route, this is not my trade route, they set it up to trade with me. As I understand it, this lowers the price of Steel in the British Market and increases the price of Steel in the American Market. The difference then becomes profit (and gdp) for the UK trade centres in Yorkshire.
Britain makes good money here, not only are they lowering the price of Steel in their market but they are also employing their workforce in profitable jobs which are then taxed by them adding directly into the treasury (although if they built their own steel mills it would make more profit). I buy lots of my own steel as a construction good, so I am spending more money on steel while only getting a fraction of it back from income taxes on slightly more profitable steel mills. To me this seems like this trade route directly takes money away, while giving me less money in return (I just end up paying my own factories more), is that true?
I could set up a export trade route to GB, but my steel mills have slightly higher productivity at 22.2 compared to the 20.3 the trade centre earns, so I would rather produce steel and not have export trade centres.
would switching to Protectionism and throwing protect domestic supply on goods I don't want to sell harm my Economy in any way?

 

[Emperor8428]

It's a tradeoff. More steel demand => Expanded steel industries => More non-peasant jobs => More taxes, consumption demand, qualifications.
But at the same time, higher steel price => construction is more expensive => larger deficit / debt => need to expand construction at a slower rate.

In this case though, I think 135 units of steel is basically nothing, it allows you to support 1 to 1.5 extra steel buildings while maintaining a similar price level, which doesn't take very long to build

 

[TheFlemishDuck]

The Ai is not paying for the convoy's here, only the bureaucratic cost which is low. The trade remains at a size where land trade is sufficient for. likely the Uk would accept another 135 units if you would be the one sending it to them, and with bidirectional trade you effectively have double the land capacity.

Going protectionism and slapping a 30% tariff on it will bring in 6750£*0.3= 2025£, thats not too bad however at the current profitability that trade would likely decrease in size due to it. At a 10% tariff it would more likely stay this size and that would yield 675£ in income to the state. A high tariff under protection would likely allow you to push the size of the trade down, alternatively you could take a smaller steady income on it over a 10% tariff.

Steel is a good industry that later in the game can attain rather high productivity per worker, so there is some advantage to having the AI buy goods like that from you as a means to have more worthwhile industries in your economy. My advice would more be along the lines of "build more steel and slap a small export tariff to it withought pushing the size of the trade down much, indeed the extra steel could stimulate a somewhat larger trade and some extra tariffs, and while 10% tariffs dont seem to bring in a whole lot of income it does increase the return on investment of building a steel mill as you get extra tax and tariff revenue. You dont want to spend convoys though on a trade where you only take 10% tariffs, atleast the tariffs in that case make up only slightly for the convoy cost (and steel is a heavy good) whereas at 30% the margin is far larger.

 

[FranklyJustNess]

You are looking at it that your market has a number of buy orders it wants to satisfy (your construction sectors asking for a set number of steel), and that the introduction of foreign buy orders pushes the price up, and makes it harder for your domestic industries to source local steel. There's some truth to that - if you play as Russia, it's an excellent first choice to tariff the hell out of your wood, as you need it for construction, and will use all of it, and it actually is a massive swing for government budget. But in this case... well it's no longer such a situation.

You effectively are getting more money into your economy, as the pops in UK market are the ones buying this steel. It's their buildings that push up the price, and it's their buildings that still pay it, and it goes into the profits of this steel mill. For the steel mill owners it's an excellent deal! That's why the Industrialists are in favour of Free Trade (they could also easily import input goods).

Though yeah, if the situation wasn't UK trade route vs no trade route, but UK vs Your trade route, then yeah, you are leaving some money for them. It's UK that gets the Trade Centers, and it's UK that taxes the pops there. Though it's also the UK that pays convoys and bureaucracy. It's a tad weird system tbh.

 

[delta180]

It's a tradeoff. More steel demand => Expanded steel industries => More non-peasant jobs => More taxes, consumption demand, qualifications.
But at the same time, higher steel price => construction is more expensive => larger deficit / debt => need to expand construction at a slower rate.

I don't see how this translates into less peasant jobs, also consumption taxes are only taxed on consumer goods I believe. I am aware if I owned the trade route, then it would decrease the amount of peasant jobs and create capitalist jobs that would reinvest in the investment pool. But since it is GBs trade route, they get all those bonuses.

Going protectionism and slapping a 30% tariff on it will bring in 6750£*0.3= 2025£, thats not too bad however at the current profitability that trade would likely decrease in size due to it. At a 10% tariff it would more likely stay this size and that would yield 675£ in income to the state. A high tariff under protection would likely allow you to push the size of the trade down, alternatively you could take a smaller steady income on it over a 10% tariff.

I read on the wiki that prices in this game decrease by 75% of the needed value for each deficit. So since I am trading 135 steel, that means if that trade route didn't exist, I could buy 0.75*135 = 101 steel more at the same cost to myself at current prices, buying an extra 101 steel costs 4848, which is far more than I earn from my 30% tariff. So shouldn't my objective be to decrease the size of the trade rather than tariff it?

You effectively are getting more money into your economy, as the pops in UK market are the ones buying this steel. It's their buildings that push up the price, and it's their buildings that still pay it, and it goes into the profits of this steel mill. For the steel mill owners it's an excellent deal! That's why the Industrialists are in favour of Free Trade (they could also easily import input goods).

But my steel mills sell to GB at my market price, so the increase in their profitability is small compared to what GB are taking in profits. My local consumption would also increase to match the new lower price of steel meaning all my other businesses and my government would make more profit. I fully understand that for a end-market customer goods (like furniture or clothes) the increase in price and profit is better for my overall economy, but I don't see how that translates to intermediatory goods like steel or iron which become more profitable as an end good.

 

[FranklyJustNess]

But my steel mills sell to GB at my market price, so the increase in their profitability is small compared to what GB are taking in profits. My local consumption would also increase to match the new lower price of steel meaning all my other businesses and my government would make more profit. I fully understand that for a end-market customer goods (like furniture or clothes) the increase in price and profit is better for my overall economy, but I don't see how that translates to intermediatory goods like steel or iron which become more profitable as an end good.

Well, think of it as a total dividends in your economy. If your steel mills sell their goods for more, then they make more profit, and in this case, this new demand and money comes from outside your market - the British are paying for your steel to your building. This also means everything that uses the steel in your market has to deal with the price being higher, but as long as they make a profit, they still will, just a bit smaller. Plus any loss they are taking is then money paid to the capitalists in the steel mill anyway. Your total amount of dividends in the economy stays the same + whatever the British pay you. Looking at the big picture you don't actually lose anything.

Exceeeept. We are looking at steel. Steel is bought in large quantity by your construction sectors, that you as the government pay for (at least the 25%/50% that aren't private). This means by increasing the price of steel you transfer more of the government money into the dividends of Steel Mill owners, which might not be ideal.