Nobody wins a trade war, but sometimes one side loses less than the other. If China and America square off, toe to toe, who will be bruised the least?

University of Texas professor Huaiyin Li argues that China will emerge the winner. Li believes a trade war will only accelerate China’s shift to high-end manufacturing:

A trade war with China will generate immense pressure on the Chinese government and companies in the short run, especially those that have long benefitted from the poor protection of foreign intellectual-property rights, high tariffs on targeted imports, and subsidies on selected manufacturing sectors. The sanctions against Chinese firms, such as the seven-year ban of business transactions between American companies and the Chinese ZTE in April 2018, would likely paralyze the core businesses of the latter, which relied on chipsets and other components in large quantity from its U.S. suppliers.

In the long run, however, the sanctions would function as a stimulus for Chinese high-tech enterprises to invest in the development and manufacturing of the key components that they had long relied on the overseas market. …

As a matter of fact, China’s shift to high-end manufacturing has been ongoing for years and will continue whether or not a trade war breaks out between the two largest economies. But the sanctions against the Chinese firms would likely facilitate, rather than impede, the process.

Read the full article at The National Interest, here.

 

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