As tensions over trade between China and the United States and China flare up time, markets across the globe are anticipating what could be a new bout of economic conflict between the two world’s largest economies. With the possibility of new tariffs and retaliatory threats exchanged the question is: Can China win an U.S. trade war?
The Spark Behind the Latest Standoff
The latest tension was triggered when an announcement by the U.S. Trade Representative’s office proposed to raise the tariffs on a variety of Chinese products and services, citing national security issues intellectual property rights violations and the what Washington considers “unfair trade practices.”
China responded with a ferocious rhetoric and suggested countermeasures, which could include restrictions on crucial exports, such as rare earth minerals and electrical car components — industries that China has leverage strategically.
China’s Position: Economic Resilience Meets Strategic Pressure
Although tariffs can create temporary pain, China has shown considerable resistance to trade disputes in the past. The Chinese government has the capacity to use state-backed subsidy programs and manage currency valuation and reroute trade to its global partners via initiatives such as that of Regional Comprehensive Economic Partnership (RCEP) as well as the Belt and Road Initiative (BRI).
Additionally, China’s dominant position in global manufacturing, particularly in areas like solar panels, batteries, as well as electronics grants China bargaining power which can reduce the impact of tariffs.
“China may not ‘win’ in a traditional sense, but it can outlast and outmaneuver the U.S. in specific sectors where it holds critical supply chain advantages,” says Dr. Mei Lin, an international trade analyst from Singapore.
U.S. Strategy: Economic Pressure with Political Motives
For Washington the strategy of tariffs is more about politics than the strategy is also about economy. In a presidential election the idea of taking a strong attitude towards China is a way to appeal to bipartisan opinion. U.S. officials argue that tariffs are needed to protect American industries, decrease dependence of Chinese sources of supply, and promote the principles of fair trade.
However, critics warn that the tariffs could be counterproductive and increase costs for American companies and consumers, but doing nothing to alter China’s economic habits over time.
Can Anyone Really “Win” a Tariff War?
Experts are divided over whether a winner will emerge from a lengthy dispute over tariffs. It is evident from history that such conflicts often result in more damage than victory.
“Both sides are liable for the costs of the event of a trade war. It’s all about who can endure the cost longer and also who can reduce the damage to their domestic economies,” says Peter Caldwell who is a Senior economist with Global Insight Advisors.
The main risk, experts warn, is the growing decoupling between both economiesa move that could alter worldwide supply chains as well as investment flow for years to in the future.
The Bottom Line
Although China has the tools to limit the impact from U.S. tariffs, declaring”win” or “win” is complex and subjective. Much is contingent on the length of the war and the specific sectors involved and the way both governments handle expectations at home amid a rise in nationalist sentiments in the economy.
One thing is certain that as tensions in the trade war escalate all over the globe will also be paying attention and adjustingto the ripples.