Could the U.S. Be Winning the Trade War with China?

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Trade wars are often thought of as lose-lose situations. However, President Trump obviously thinks the U.S. can win the trade war he has ignited with China. And it looks like he isn’t alone in his assessment.

David Brown wrote an article in the South China Morning Post that doesn’t merely say the U.S. can win this trade war with China, but that the U.S. is winning this trade war with China.

You want proof? Brown writes right in the headline that the proof will be  China’s economic growth falling to 5 percent.

Brown writes:

China’s potential exposure to a trade war is much greater than the US’, and Trump knows he has the upper hand. China’s export reliance on the US market is much greater than American dependence on China, by a multiple of five times. It is the president’s trump card.

According to estimates by the International Monetary Fund, a full-blown trade war could knock as much as 1-1.5 per cent off China’s growth rate, while the impact on the US might be more limited, to the tune of 0.1-0.3 per cent shaved off growth, thanks to the US economy’s relatively greater domestic dominance. Given the rapid pace of US growth right now, it is a price Trump probably thinks worth paying to intensify pressure on China.

President Trump certainly has not been afraid to intensify pressure on China. Tariff threats between the U.S. and China have been escalating and escalating. The last blog we posted on it had Trump threatening $450 billion of tariffs on Chinese goods. But the threats didn’t stop there.

President Trump has since threatened to slap new tariffs on every single Chinese good imported into the U.S.

Just weeks ago, Bloomberg reported:

President Donald Trump threatened to impose tariffs on every single Chinese import into America as the world’s two largest economies exchanged the first blows in a trade war that isn’t set to end anytime soon.

…

… [President Trump] indicated to reporters Thursday on Air Force One that the final tariff total could exceed $500 billion, almost the same amount that the U.S. imported in 2017.

Yes, you read that right. President Trump’s tariff threats on China have reached over half a trillion dollars. I just used the word trillion without being ironic or hyperbolic. At this point it seems like I might as well be using made up numbers like a gazillionbadillion dollars. But these are real numbers Trump is using to apply pressure to China.

And it’s not all talk.

On July 6th, the U.S. levied its first set of strictly Chinese aimed tariffs in the value of $34 billion. Of course, China fired right back with retaliatory duties.

Once those shots were fired, it’s fair to say we have officially entered a trade war, though many are still calling this a trade dispute.

Just because the trade war is likely more damaging to China than the U.S. does not mean that China is going to give in to U.S. demands. There still is no sign that Beijing will stop fighting, even if the South China Morning Post is right and China is losing.

President Trump has famously said that a trade war is easy to win. Maybe it is easy for the U.S. to win if winning is defined by the trade war doing less damage to U.S. economic growth than Chinese economic growth.

However, a trade war is probably much more difficult to end.