Donald Trump's protectionist economic policies led to the introduction of tariffs on $550 billion worth of imports from China. President Xi Jinping responded with tariffs of his own, affecting some $185 billion worth of US-made products. As the two global economic behemoths enter a trade war, what are the implications for both economies and the rest of the world?
The trade war is good for the United StatesShow moreShow less
The U.S. has the upper hand; it is likely to win the trade war because it can place tariffs on more imports from China than China can place on imports from the United States. Winning will force China to stop its unfair trading practices which will make the U.S. more competitive and bring jobs back to the United States.
The U.S. will win the trade war because it has more leverage against China. The U.S. buys more from China than vice versa, which means it has more imports to place tariffs on and can hurt China’s economy more.
The U.S. is likely to win the trade war. This means it can protect jobs and force China to stop abusing it via China’s unfair trade policy.
The U.S. has a significant trade deficit with China meaning that the U.S. buys more items from China than China does from the United States; with the surplus of goods in the world, the buyer has more power. As a result, there are more imports that the U.S. is able to place tariffs on and that China’s economy is more vulnerable than the United States’. If the U.S. tariffed all Chinese imports the effect on China’s economy would be far more damaging than if China tariffed all the U.S. products it imports.
If they continue in a tit for tat exchange, eventually China will experience a huge economic shock and damage. This means the U.S. has more leverage in forcing concessions from China and can ultimately get what it wants, as China would never follow the war through to this conclusion.
While the U.S. can place tariffs on more imports, China still has more leverage. China can sell U.S. bonds to tank their value and/or further devalue its currency. This lowers the price of its exports which gives them a more competitive advantage. Since China has more leverage, it is more likely to win the trade war.
[P1] The U.S. buys more from China than China buys from the United States.
[P2] The U.S. has more imports that it can place tariffs on.
[P3] This means the U.S. has more leverage in forcing concessions from China and will win the trade war.
Rejecting the premises
[Rejecting P3] China has more leverage because China can devalue its currency and/or U.S. bonds.