Who Will Win The Trade War – The U.S. Or China?

Is there a strong parallel between our long war in Vietnam and our expanding trade war with China? One was a nine-year shooting war costing over 58,000 American lives, as well as those of more than one million Vietnamese. The other has been a trade war that may have only just begun.

war with china

moerschy / Pixabay

During the Vietnam War, we dropped a greater tonnage of bombs than we had dropped on our enemies during all of World War II. Somehow, the Vietnamese were able to withstand this onslaught until we just threw up our hands and withdrew our troops.

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And so, the greatest military power in history lost a war to a third-tier nation with a primitive economy, but with an infinite amount of patience and the ability to absorb an astounding amount of suffering.

Now we are engaged in a purely economic war with China, the world’s second largest economy – a nation that had become, by far, our largest supplier of manufactured goods.

We are clearly inflicting much greater damage on their economy than they are on ours, because they sell a lot more to us than we sell to them. Many more Chinese than Americans will be laid off. True, we will have to pay somewhat higher prices, but it’s a hardship most of us can easily withstand. So, there is no question that this trade war will continue to hurt the Chinese a lot more than it will hurt us.

Crops

Our farmers, many of whom send most or all of their crops to China, have suffered much more than any other economic sector. Still, they account for less than two percent of our workforce, and are receiving as much as $18 billion in U.S. government subsidies to offset some of their losses.

As the trade war continues to escalate, American families will, on the average, need to pay about $1,000 more per year for imported Chinese goods. But the millions of Chinese factory workers who will be laid off will face much greater hardship.

Perhaps a much better analogy to the trade war than the Vietnam War would be a one-sided boxing match. Imagine a very powerful puncher with an opponent who can absorb hard punches. Who would win?

We are hurting the Chinese a lot more than they are hurting us. But China can just wait us out, just like the fighter who can easily absorb pain can wait out his hard-punching rival until he tires.

Trade war with China - pain threshold

We still happen to live in a democracy, although many Americans are beginning to wonder about that. In just fourteen months we will go to the polls to elect a president and a new Congress. How our trade war with China is working out for us will be a major issue.

China chooses its president very differently. Until the accession of Xi Jinping, the leaders of the Communist party would choose a new president every ten years. But since the accession of Xi Jinping, the rules were completely upended. There would no longer be the customary ten and out. The party leaders made Xi President for Life.

China’s trade war strategy is becoming increasingly apparent, and President Trump and his allies are well aware of it. The Chinese will just wait us out, hoping that in the November 2020 elections, the Democrats will take over the presidency along with both houses of Congress. And perhaps, then, the United States will agree to a much more favorable trade deal with China than Trump has been offering.

Of course, Mr. Trump has proclaimed that there’s no way he can lose the election. Occasionally, he even muses about serving a third term – despite the fact that our Constitution expressly prohibits that. Well, why not think really big? How does President for Life sound?




About the Author

Steve Slavin
Steve Slavin has a PhD in economics from NYU, and taught for over thirty years at Brooklyn College, New York Institute of Technology, and New Jersey’s Union County College. He has written sixteen math and economics books including a widely used introductory economics textbook now in its eleventh edition (McGraw-Hill) and The Great American Economy(Prometheus Books) which was published last August. Email - steveslavin@cs.com