The US-China “Trade War”: The War Nobody Can Win

Bahri Yilmaz ()
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Bahri Yilmaz: Sabanci University, Koc University

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: The main aim of this paper is to analyze US-China trade relations and the so-called “trade war” between the two countries. As a first step, we will look at the trade relations between the two countries and explain why President Trump is eagerly following a protectionist trade policy toward China and fighting with some of America’s oldest trading partners. Finally, we will focus on the possible effects of the trade war on both countries’ economies. The US and EU governments and other leading economic actors have underestimated China’s rapid eco-nomic growth and were unprepared for the dawning of new economic power. Forty years lat-er, the first reaction to new economic power and its expansionary economic policy came from US President Donald Trump and later by the EU and Germany. The trade conflict be-tween the United States and China has not yet affected trade flows, which are still growing in favour of China. Despite the Trump administration’s penalty tariffs on China, the US trade deficit in goods with the country could not be reduced at all. Obviously, the initial round of tariffs imposed by the United States has not stopped Chinese firms from exporting more goods to the United States in the last year. For the time being, nobody can make any predic-tions about the outcome of the trade war. It seems nobody can easily win this war, and it will be costly. The continuation of the trade war between China and the United States will more or less cause strong economic turbulence in every nation as long as both Trump and Xi hold on tight to their trade policies and do not be-have as responsible statesmen. As a final state-ment, to borrow words from Paul Krugman, “at this rate, we may have to wait for a new pres-ident to clean up this mess, if she can.”

Keywords: China; USA; Trade War; Mercantilism; Exchange Change Regime. (search for similar items in EconPapers)
JEL-codes: E6 F1 F4 F6 N1 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2019-10
New Economics Papers: this item is included in nep-int and nep-mac
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