In a short period of time (couple months, a year?), your argument might hold. But I don’t think country B can increase the price for long. The beauty of market and capitalism is that as long as there is a demand, there will be a product. Country B cannot increase the price in a long run because it will create a void for the same product at a cheaper price. In a very short period of time, country B may benefit by this disruptive behavior. But there is no promise that its short-term gain will outweight what it has already lost from selling below cost. Not to mention that there are not only two countries in the world but over a hundred. An intentional disruptive tactic is actually very risky for any country.

Actually, I can’t even agree with your Walmart example. I understand that everyone hates Walmart. But I think that even the mighty Walmart cannot suddenly raise every goods by 50% tomorrow. Customers will just go elsewhere. So I don’t think your argument will hold.

On the other hand (sorry to be a bit repetitive), tariff is bad because of 1). distortion to supply/demand—i.e. market gets the wrong signal of what is needed to be produced/invested and what is not; 2). inefficiency—cannot utilize the comparative advantage effectively; 3). unfairness—the entire public is subsidizing a small group in the country imposing tariff.

Honestly, I found most pro-tariff argument is sentimental. If we really need to help the worker, we can just do it directly. Maybe introduce special aids for the layoff worker. Also, many may claim their industry are absolutely essential to the nation. I am quite a bit doubtful about it. There was a time in the 80s that the scissors manufacturer in the US claimed that their industry was essential to the security of the nation. It sounds totally absurd now. And definitely, I don’t see how tire manufacturing is an essential industry to any country.

A temporary comparative advantage can be created by a country dumping a good below cost for a while.

Suppose you have two countries A and B. Both produce a product P. B starts selling product P below cost, and undercuts A’s internal price of product P. Then people in A can save money by buying the product from country B. However, industries tend to die if they lose too much business. The industry to produce P in country A dies. Then the only producer of P is country B. After this, country B may increase the price above the price at which country A sold it. Country B may even threaten to deny country A access to P under certain conditions and use it a diplomatic bargaining tool. This price increase results in reduced access to the good for people in country A. If the good is something where continuous access is required, such as a staple food, or a resource needed by one of country A’s main industries, the cost of a sudden reduction of accessibility can be quite high.

This kind of thing does happen on a business level, as Walmart exemplifies, and as long as countries place their own money above the needs of people in other countries, they will follow the same strategy when they can.

In this example, the need to follow comparative advantage is overruled by the need to guarantee access to the product. In computing terms, redundancy may be needed in case one source of the good fails. So how do you maintain continued access to a good when the comparative advantage for the good is held by another country, perhaps only on a temporary basis?

By the way, I’m arguing against your statement that tariffs are always bad. I do not contest that Obama is making a bad move with the tire tariff. I don’t know enough about that.