The trade war between the US and China has begun and escalated. And while it is clear when the possible start date of the trade war is, it is far less clear what its consequences will be and who will win it.
In fact, there is also a lose-lose option.
However, let's look at what could be lost from a potential trade war between the world's two largest superpowers.
ΠContrary to Trump's constant comments that the trade war is something "good and will be easily won", experts are far from convinced of this thesis.
"Everyone will lose from the trade war", believes Nicholas Lardi, an expert on the markets in China in Reterson Institute for International Economics in Washington, quoted by the SNBC publication.
The opposition, according to him, is the one that will lose the least...
And while the direct loss for the two economies, albeit difficult, is possible to calculate, what is the great "unknown" in line with all other economic losses in the chain as a result of the disruption of trade links throughout the global trade chain.
The indirect victims of the US-China trade war
It is good to remember that it was the reduction in customs tariffs over the past century that initiated the boom in global trade. ΠIn the 1960s, trade as a percentage of global GDP was barely 24%, while today it is over 60%.
The growth of trade generates growth in the global economy, the creation of new jobs, and an increase in living standards around the world. The growth was driven by emerging economies in Asia. This, in turn, has led to a historic reduction in poverty in the region and an increase in living standards. Over 1 billion people have been lifted out of poverty in the last two decades alone.
Of course, the growth in trade has not benefited everyone equally. In fact, it has largely benefited developed countries and has led to a greater income gap.
Πp A full-scale and long trade war between the US and China and the US and the rest of the world would cause many people to lose their jobs, as entire industries and sectors would be affected. ΠGovernments will lose revenue (which means they will start taking worse care of their citizens), and consumers will have a limited choice between a smaller number of goods.
Developing countries will become "silent spectators" in the trade war, there will be even greater casualties.
How quickly did it get here?
ΠLast year, Janet Yellen was on a trip to Πskine to deliver a reassuring message. The US does not want to separate from China, said the then-Treasury Secretary. "Our two economies are deeply integrated and a major split would be catastrophic for both."
12 months after President Donald Trump's tariffs of more than 120% on Chinese goods and Putin's determination to open up to trade mean the seismic rupture that Yellen warned about is quickly turning into reality.
About $19 trillion has been wiped off global stock markets since the S&P 500 closed at a record high on February 19, and the sell-off in government bonds this week has been the worst since the pandemic itself. Economists are rushing to put a price on the US recession as Washington and Beijing enter a dangerous precipice of economic crisis.
The White House says Trump "has a backbone of steel and will not break", writes the financial publication Bloomberg. On Wednesday, he ratcheted up pressure on China, which raised import tariffs to 125%, while announcing a 90-day pause in reciprocal tariffs for dozens of other trading partners. Meanwhile, Putin vowed to "fight to the bitter end." On Wednesday, China responded to Trump's previous move, which raised tariffs on American goods to 84%. This suggests that President Xi Jinping is not in a position to step down.
While Trump's track record of sudden tariff cuts and U-turns means that nothing can be ruled out or ruled out, officials in both capitals have commented privately that there is little prospect of a short-term breakthrough.
Speakers at an event for At a fundraiser late Tuesday, Trump said that officials in Beijing “want to make a deal.” A social media account linked to Chinese state media, which is often used to announce official positions on trade, said that China was not “worried about problems.” and although the door is not closed to negotiations, "it won't happen that way".
The former US ambassador to Washington, Qi Tiankai, was in Washington last week for private meetings with think tanks and other interested parties, but he deliberately avoided meeting anyone who was in Trump's circle, according to the group, who were late to the discussions. Qiu's view of the impasse can be summed up as follows: Trump wants China to come begging for a deal, and that's not something Putin is willing to do, the group said.
"Liberation Day"
Πs position on the U.S. president has shifted from optimism since taking office to disenchantment and a mode of struggle.
Despite the agreement to establish a "strategic channel" in the talks between Xi and Trump on January 17, no mechanism for dialogue was established. The series of tariffs signal to the Chinese that things may not develop as they should, as the latest findings and the additional 50% challenge the determination to open a deal.
"The US and China are in a full-scale trade war and watch out for big deals that could be scrapped", according to Arthur Kroeber, a New York-based partner at Gavekal Dragonomiss, who was previously based in Beijing. "ΠThis essentially means that Trump is committed to cutting US trade with China."
This leaves the two economies, with a combined GDP of $46 trillion, locked in a game of chicken. At stake are nearly $700 billion in two-way annual goods trade, roughly $1.4 trillion in Chinese portfolio investment in the U.S., and less obvious but no less significant variables like the ties between the two sides, forged over decades in business and academia, and public opinion that has soured on both. sides.
ΠA survey last year by the Pew Research Center found that 8 in 10 Americans have a negative view of China, but a Pew survey released Tuesday also found that 52% believe that American tariffs on China will hurt both them personally and the United States.
Bloomberg Economists estimates that A 100% US tariff on Chinese goods would practically wipe out all of Asia's manufacturing output in the medium term. Overall, the US average tariff rate for all nations is 24.7%, which would be a blow to B&P; of 3.6% and a 2.1% increase in the Federal Reserve's inflation forecast over the next 2 to 3 years.
As the US strains, the tight private sector illustrates how dependent America is on Chinese imports and how Trump's ambitions to stimulate a golden era in manufacturing, ironically, depend from its relationship with its trade adversary.
Businesses large and small are already expecting a blow and demanding relief from Chinese tariffs. Companies including global giants such as BASF, Ford, Ingersoll Rand and even Tesla have already submitted more than 1,100 requests for exemption from tariffs on machinery from China, which they say will require them to set up or expand production lines in the United States.
Capital and intermediate goods account for about 43% of total imports from China, meaning that "There is a perverse possibility that if these goods don't come into the U.S., it could slow down U.S. manufacturing and could mean job losses in the short term," said Oly Sonola, head of U.S. economic research at Fitch Ratings.
This is just one of the countless ways the divorce could hurt the both economies and to swell on a global scale. Indeed, there are already signs of a slowdown.
Global trade volumes are showing signs of a slowdown as the world's two largest economies are struggling. The World Trade Organization predicts that Trump's current tariffs will cause an overall contraction of about 1% in global goods trade this year - a four percentage point decline from the WTO's previous forecast.
Πo-weak demand
"We will likely see a significant decline in container demand "The U.S. in the near future, and probably also in the domestic Asian manufacturing ecosystem," said Judah Levine, head of research at Freight Growth, a leading air cargo booking platform.
Emily Staesboel, senior shipping analyst at Henet, an Oslo-based digital freight platform, said that carriers of goods are being delayed or frozen due to the tariffs and the "US-China trade war is the main driving force".
In factories across China, orders are already on hold, prospective US customers are silent, although some will be hit harder than others.
Criticism of China
"China is in no hurry to start negotiations, because over time we may be in a better position", commented Wu Xinbo, director of the Center for American Studies at Fudan University in Shanghai. "The US will face retaliation from China, the EU, Canada and perhaps others. And domestically - you see the stock market reaction, the slowdown in economic growth, the fears about inflation - I think Trump is being corrected in front of a situation that he did not expect," he added.
The White House argues that the trade deficit with China means that the tariffs give the US more power in the trade war. "America holds the levers of influence and everyone knows it and that's why they need to be challenged and they need to make concessions", said Stephen Miran, the White House's chief economist, on Bloomberg Television on Tuesday.
With Evan Medeiros, who advised former President Barack Obama and Treasury Secretary Hank Olson on policy for China, while on the post, believes that this is a misinterpretation of all the economic tools from export controls to anti-trust and cybersecurity reviews that Chinese officials have at their disposal.
In a new report published on Tuesday, Medeiros and co-author Andrew &Phillips document a whole range of "precision-guided economic munitions", which China has at its disposal, which are "designed to inflict targeted and often significant pain for political and geopolitical purposes".
This, Medeiros argues, gives China an asymmetric advantage in any economic conflict with the United States. ""The problem with a tariff war is that both sides suffer. And the big question in the US-China relationship today is who suffers more and who can withstand more pain?" said Medeiros, who is now at Georgetown University.
"The Chinese, you know, are developing a whole new tool for competing with the United States, one that gives the Chinese the ability to inflict a lot of specific pain on a lot of specific players in the United States without any corresponding cost or pain to themselves. And if you enter into long-term economic competition with the US, as they are, that is incredibly beneficial."
Trump's attempt to increase pressure to force talks is a "dangerous strategy", Medeiros also believes: "The Chinese don't want to negotiate with a gun to their head".