As troubling as the election chaos has been, employment and living costs will rise if Trump wins. Aside from Sinophobia, the actual economic costs will increase with a return to the Trumpian attempts to end democracy and improve the wealth of the wealthy. His attempts to reinstate a trade war will make the rich richer and everyone else not so much. Add to that the manipulation of gas prices closer to election day. South China Sea conflict remains a sideshow until the next Suez Canal jam-up.
On the campaign trail, Trump has vowed to escalate the trade war initiated during his first term. However, studies have shown that his trade policies fell short of promises made to rejuvenate U.S. manufacturing and spur job growth. In some cases, analysts told ABC News, the policies harmed U.S. producers while raising prices for consumers.
A heightened trade war over a long period could expand certain areas of U.S. manufacturing, some analysts said. But, they added, the move would come at significant cost for consumers already worn out by inflation.
[...]
Trump has recently vowed to expand the trade war if he takes office next year, promising to impose tariffs on most imported goods. Speaking with Fox Business in August, Trump said the tax on imported items could ultimately stand at 10%.
Earlier this month, when asked by Fox News' Maria Bartiromo whether he would consider implementing a 60% tariff on Chinese goods, Trump said: "No, I would say maybe it's going to be more than that."
Eswar Prasad, a professor of trade policy at Cornell University, said such a policy would dramatically impact the U.S. economy, sending prices skyward while helping some domestic industries and hurting others.
abcnews.go.com/...
(January 2024)
Second, although U.S.-China bilateral trade and investment ties have stagnated, the two countries are still embedded in an extensive web of complex interdependence across all aspects of their economies and broader societies, which extends to countries around the world. Interconnectivity has created certain vulnerabilities, such as overdependence for critical goods and the potential transfer of dual-use technologies, but it also has created extensive economic and national security benefits that raise the costs of conflict and the value of continued interaction to both sides. Understandably, neither side is keen to abandon such ties. The fact that other countries are deeply connected to the United States and China further raises the costs to Washington and Beijing from taking precipitous actions. Interdependence is no panacea, but it is a structural feature shaping the choices of all parties.
www.csis.org/...
(2023)
After the 2008 global financial crisis, the number of US manufacturing jobs declined rapidly — by more than 2 million in three years — exposing the deep-seated structural problems in the US economy. Data for 2022 show that, despite a strong rebound in US employment, new jobs are created mainly in the service sector. And the imbalance in the US labor market shows that attempts to decouple the US economy from China's will not solve the deep-seated structural problems in the US' labor market or increase manufacturing jobs.
As a matter of fact, decoupling will create more trouble for consumers and businesses in both China and the US. The US and China are highly interdependent economies, with China being a major supplier of consumer goods, including electronics and clothing.
In such a situation, decoupling will force US consumers to choose more expensive alternatives, and US companies to give up business opportunities in China. In a 2021 report, the US Chamber of Commerce warned against the economic gloom that decoupling from China will cause, asserting that the costs of forgoing the Chinese market are substantial for US companies, in terms of direct loss of potential revenue and indirect loss of market share.
Most business leaders don't want to decouple the two economies, with many saying that all the time, effort and investment they have expended to establish a presence in China will go to waste.
Furthermore, decoupling from China would require a significant overhaul of the global supply chains, because many products sold in the US are made with components sourced from China. That would be a time-consuming and expensive process.
Indeed, the US' excessive focus on major-power competition has turned the mutually beneficial Sino-US economic ties into a political and economic battle. The Joe Biden administration has not officially endorsed a policy of decoupling. Instead, it has emphasized the need for a strategic approach to compete with China, including reducing economic interdependence with China. To many in the administration and the Congress, the strategy seems ideal to reduce the US' exposure to economic and security risks posed by China.
global.chinadaily.com.cn/...
Payoff Structure
The payoffs here are based on the potential effects on each country’s economy, including the risks of diminished growth and increasing uncertainty. At the first node, stopping will give a negative payoff to both countries (for simplicity, this is equal for both countries). At the third node, abandoning the course will give a more costly, negative payoff as the trade war progresses. China’s compliance signals a victory for the US and a corresponding defeat for China. Here, we assume that u < 10.
Yet, a more complicated and difficult-to-model structure will arise if we consider the individual payoffs to these politicians. Trump’s own economic metrics and his chances at re-election contribute to his payoff while Xi’s payoff probably has a more direct linkage to the well-being of the economy.
Solution to the game
Unfortunately, by “solution”, I do not refer to a panacea to the trade war but rather, the theoretical outcome predicted by game theory. Here, we assume that all players are rational and there is common knowledge of rationality (obviously, this is false).
Solving the game by backwards induction, we observe that at the third node of the game tree, Trump has to decide if he wants to continue the trade war or abandon his protectionist course. If Xi believes Trump to be rational, Xi will conclude that Trump will abandon course because the payoff to China of -u is infinitely greater than -∞.
Therefore, at the second node, Xi will retaliate, because this will give China a higher payoff of -10 compared to — u that will result from complying with the tariff hike.
Ultimately, at the first node, a rational Trump would have stopped engaging in the trade war. This would be the sub-game perfect equilibrium of the game.
However, this hinges on common knowledge of rationality and that both players are rational.
medium.com/...
(2020)
China has achieved a higher growth rate than the US since 1977, and during this time, it has become the second largest economy in the world. At the same time, China, which has become the biggest competitor of the US, has become both the US's largest importer and the third largest export market. On the other hand, despite China's growth, the US trade deficit with China has gradually increased.
While this trade deficit was 273 billion dollars in 2010, it was 419 billion dollars in 2018. The US administration who disturbed by these developments started the trade war by introducing additional sanctions for some products on March 8, 2018, to prevent this position of China. With China's response to the US move, mutual moves followed each other, and the trade war became more violent.
While the highest sanction rates were applied, negotiations for a trade agreement between the US and China began in the second half of 2019. As a matter of fact, the first trade agreement was signed on January 15, 2020. Today, some statements made between the US and China make it questionable whether the parties will remain loyal to the agreement. On the other hand, it remains uncertain whether there will be new agreements or whether the trade war will fire up again.
www.researchgate.net/...