Us-China trade war would be extistential – collapses international trade

China-US economic relations have expanded substantially over the past three decades, their mutual total merchandise trade rose from $2 billion in 1979 to $579 billion in 2016. China now is the US’ second-largest merchandise trading partner, third largest export market, and biggest source of imports. China-US mutual trade and investment relations benefit both countries, the US provides China a big exporting market, and the US imports of lower-cost goods from China greatly benefit US consumers. China is also the second-largest foreign holders of US Treasury securities, which helps US to keep interest rates low (Morrison ).

Despite growing economic relations and mutual dependence, China and the US bilateral disputes have become increasingly intensive. China criticizes the US of their export restrictions on high-technology products, their unfair treatments of China’s market economy status, and unreasonable trade sanctions on China. Major areas of concern expressed by the US include large numbers of trade surplus, relatively ineffective record of enforcing intellectual property rights (IPR), discriminatory innovation policies, and mixed record on implementing WTO obligations. Although faced with gradually increasing commercial disputes, the China–US economic relations are positive and develop fast in general. But the harmonious situation seems to change after Donald Trump was elected to be the President of the US

Trump administration officials contend that the US should take a more aggressive stance against China’s trade policies. In the presidential election period, Trump claimed to levy 45% punitive tariffs on imports from China, and levy 35% punitive tariffs on imports from Mexico. After Trump officially became the President, although severe trade wars had not happened, but trade bargaining in the fields of adjusting trade imbalance and foreign exchange rate was already in process. China–US trade war is not just a threat by Trump, it may occur in some conditions in the future. Even though the furious trade war between China and the US will not end happily, research on the effects of possible trade wars are still valuable and interesting from a policy perspective. Based on these backgrounds, this article numerically explores who can win the possible China–US trade war with the methodology of computational general equilibrium (CGE) modeling and simulation.

Literatures on China–US trade wars are limited and are mostly analytical. Ikenson () analyzes the possibilities of China-US trade war at present stage. Lazard () explores the China-US relations in the Trump era from the emerging market perspective. This article points out that Trump has started a willingness to slap a 45% tariff on imported Chinese goods and label China a currency manipulator for suppressing the value of the renminbi to boost its exports, and the article assumes that the ability of the US to impose such a tariff and the benefits of doing so are questionable. Morrison () studies China-US trade and investment relations comprehensively and analyzes possible bilateral trade wars. Hughes and Meckling () discuss the US-China Solar dispute. Schell and Chairs () analyze the US policy toward China, and give recommendations for a new administration.