Tyler Cowen has a new post entitled :
No, China did not win the trade war
He cites a recent study on the economic impact of the trade war:
This paper estimates that the trade war costs China $35.2 billion, or 0.29% GDP, costs US $15.6 billion, or 0.08% GDP, and benefits Vietnam by $402.8 million, or 0.18% GDP.
Does that indicate that China did not win the war? Look at the following data, and tell me who won the Civil War?
For 110 years, the numbers stood as gospel: 618,222 men died in the Civil War, 360,222 from the North and 258,000 from the South — by far the greatest toll of any war in American history.
This data has recently been challenged, but I think you get the point.
The primary objective for Trump and Navarro was a reduction in the US trade deficit. The deficit actually got larger, and the trade war also seemed to slow the growth of manufacturing jobs in the US. So it certainly looks like the US lost the war. Whether China won is another issue.
I’d say it’s too soon to draw any firm conclusions on who (if anyone) won the trade war. If Biden wins, I expect him to continue the recent cold war with China, mostly fought on issues ranging from technology to human rights. On the other hand, I’d expect Biden to wind down the trade war with China, for several reasons.
First, there’s a widespread view in the Democratic Party (and among economists) that the trade war was a failure. Second, polls suggest that Trump’s trade polices were not very popular among the general public—where support for free trade agreements has recently surged much higher. (You and I may not trust polls, but politicians do.) Third, the policy is associated with Trump, which makes it toxic in the Democratic Party. Fourth, if I’m right that Biden will continue the cold war with China, dumping the trade war is a convenient way to distinguish his policy from Trump’s.
If Trump wins, it’s anyone’s guess as to what the second term will look like.
My wife is currently in China, and says that things there are back to normal. She and her mother saw a movie where the theatre was so crowded that they couldn’t even sit together. The roads, the restaurants, the stores are all packed. In contrast, the US economy is horrible. If Biden abandons the trade war, a war that failed to reduce our trade deficit, it’s certainly going to look to most people like China won, even though the disparate economic performance is primarily due to Covid-19. If people want to say both sides lost, I’m fine with that claim.
Tyler commented on the trade war study as follows:
Those numbers should not come as a surprise, they do indicate that both countries are worse off, but they also show that a lot of the bargaining power does in fact reside on the side of the United States.
Sure, “a lot” of the power resides in the US. But it’s also likely true that “a lot” of power lies in the country ruled with an iron fist by a dictator for life who is negotiating with a democratic country containing a soft and spoiled electorate that is not used to the extreme sacrifices made by the Chinese at various times in their recent history.