Incentive for Market Expansion
When you take the US off the valuable trade partner table, China must look elsewhere for trade.
Winning the economic war would have serious repercussions on both China and the world
This trade war will cause short term damage to both China and the US. Whether the trade war benefits China longterm is dependent on the likelihood of it winning the war. If China can win and get important concessions out of the US, this might be a net good.
China is an economy whose growth far outpaces that of the US, and most of the world in general. Regardless of any tit-for-tat tariffs, this leaves them with more space to manoeuvre and adjust. Secondly, China has an expanded arsenal of tools to pressure the US. The way the trade war has proceeded so far has been through a tit-for-tat increase of tariffs. Given that the US imports more Chinese goods that China does US goods, the scope of the damage that US can do is greater. However, China is also the single largest holder of American debt. Because of this they always have the nuclear option of selling that debt to tank bond values. On the less extreme side of the scale, simply halting purchase of debt could similarly disrupt the value of US bonds. This attack on US bonds would certain harm China, but the damage to the US (and the rest of the world) would probably be greater. The third way that China can change the course of the trade war is the very opposite of that - they could buy more bonds to further devalue their currency and offset the effect of the sanctions. Regardless of the methods they choose, China has the tools to do more damage the US economy before its own economic bleeding becomes too severe.
This argument overestimates both China's willingness to engage in such economic warfare, and the impact that it would have on the US. Any devaluation of US debt would be extremely damaging for China and unsustainable in the long run. Aggressive currency devaluation on the other hand, would simply serve to strengthen the resolve to continue the trade war, given that such perceived 'dirty play' is a large part of its rationale. The US has the defining advantage in this trade war.
1. China can and will employ the economic weapons in its possession 2. These economic weapons will hurt the US more than they do China 3. Causing more damage than you sustain is a net positive 4. Causing more damage to the US is likely to lead to a winning of the trade war 5. Winning the trade war is a positive for China
2. These economic weapons will hurt the US more than they do China Factual refutation of this claim
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