Trade War with China: Who Wins?



We are now facing an escalating trade war between the US and China - started by the US. The question is: can the US win? And what will it cost the world?

It is worth listening to Carlos Gutierrez, co-chairman at Albright Stonebridge Group, a major global corporation and former U.S. Commerce Secretary who spoke on 18 June on "Bloomberg Daybreak: Americas":



He reminds us that the free-trade agreements that have been brokered since the 1980s are not as bad as Trump would have it: they have consistently given the US a surplus. The point is: There never was a similar agreement with China. And he doesn't mince words in describing the dangers for the whole world. He urges restraint.

Clearly Trump is not listening. A few hours after Gutierrez talked to Bloomberg, Trump had threatened an additional 10% tariffs on another $200 billions worth of goods:



Trying to answer the question of “who wins a trade war”, Bloomberg has rounded some major experts asking them what they thought. While the answers are interesting, they all focus on the short term and unfortunately don’t go beyond are the framework of classical economic analysis which overlooks geo-political factors:
  • China has limited room to retaliate in a trade war escalation: It only buys $130 billion worth of American goods while the US deficit with China runs to $375 billion; this is a “high stakes game of poker” and “China will run out of U.S. imports that it can hit with tariff countermeasures long before the U.S. does” (Rajiv Biswas, IHS Markit Singapore);
  • China needs to open up to global innovation and investment: “both China and the U.S. and other countries can really benefit from this Made-in-China 2025 strategy" (William Zarit, chairman of American Chamber of Commerce in China);
  • This is creating a “perfect storm” for China’s export Industry: it’s not just Trump’s tariff war but also the probable US Senate ban on ZTE, the Chinese electronic producer that Trump wanted to save; such a ban would  stop it from importing the American chips it needs for its phones and other products, hitting at the very heart of Made-in-China 2025 strategy;
  • There will be winners and losers, for example, China will need to buy agricultural goods from other sources than the US and that will benefit countries like Australia and Brazil; many Asian countries that are part of the China value chain will be hit.
Instead, to evaluate the dangers from a trade war, we need to look at the longer term and more broadly to geo-political factors. And here, the picture is not so reassuring.

The trade war with the US is but a battle in a much larger war. A battle that surely hurts in the short run, but will leave China victorious in the long run. Because China has acquired the “soft power” weapons to win.

Forget the Trade War: China’s Soft Power is Poised to Conquer the World

What has been happening since Trump took over the White House is this: A political void has been created, a void in world leadership that China is eager to fill, and most likely will.

Consider the facts.

Read the rest on Impakter, click here.
0