China Could Suffer Less in a Trade War Compared to U.S.
Feb 14, 2017 09:24 AM EST
China will have more resilience in a trade war compared to the U.S., experts say. They explained that the Asian giant appears to have plenty of financial resources to step in and preparedly act in such situation.
The communist government in Beijing has built China into the world's second-largest economy with a state-backed form of capitalism and has expanded the nation's global reach only in the last couple of decades, according to CNBC. A major percentage of the growth came from heavy-handed policies that favoured domestic industries, which displaced more than a million people for infrastructure projects and caused worrisome levels of debt.
Nonetheless, the key to China's rise in trade has been access to the global market, the U.S. consumer market in particular. That makes the Asian giant vulnerable to increased tensions with the U.S.
If trade tensions escalate, the U.S. will probably get hurt from disruption of the supply chain, considering the fact that many products sold in the U.S. are partly or wholly manufactured in China. According to an estimate from the Office of the U.S. Trade Representative, China was the largest source of goods imported to the U.S.in 2015, indicating a trade deficit on U.S. can be larger than that of the Asian giant.
Experts also mentioned that there's an array of non-trade related things China could do that would enable them to persuade the trade war in a personal way. One of the ways is making China a tougher business environment for U.S. companies operating there.
However, it remains unclear whether U.S-China tensions will heat up into a trade war that will utterly decimate one party over the other. Ira Kalish, chief global economist at Deloitte, said, "I don't see trade as a zero-sum game where one country benefits while the other loses." He said that both China and U.S. will certainly continue to depend on one another, at a substantial level.