Why Trade War between China 🇨🇳 and the United States 🇺🇸 May Be Useless?

If the trade deficit between the United States 🇺🇸 and China 🇨🇳 is used to justify an escalation of trade war between the two countries; this map shows that such trade war may be useless to change the situation. In fact, China 🇨🇳 is outcompeting the United States 🇺🇸 in the international trade in almost every country on the planet. Why?

If I was an economist advisor to President Trump and his administration; I would have advised them to first better understand why and how China 🇨🇳 is outcompeting the United States 🇺🇸 in the international trade in almost every country and putting the trade deficit between the 2 countries in such context…

Another element I would have brought to the attention of President Trump would be how in such context making the US economy a winner by taking advantage of such context instead of confronting China 🇨🇳 with a trade war…

China 🇨🇳 is reforming its economy by opening it up. Even if China 🇨🇳 let down all of the barriers to its domestic market to increase importations of «Made in USA» products; it won’t rebalance the deficit of trade between the 2 countries! The reason is very simple: the China 🇨🇳 economy is more competitive than the United States 🇺🇸 one…

Here is an example to illustrate what I say: Ceteris paribus, if there were no barriers of trade between the two countries, no senior management of Apple would have located a factory in the United States 🇺🇸 to produce iPhones for exporting and selling them to China 🇨🇳. Because producing iPhones in China 🇨🇳 for selling them in China 🇨🇳 is cheaper for Apple than exporting the same iPhones from the United States 🇺🇸 to China 🇨🇳, even without trade barriers: industrial inputs are cheaper in China 🇨🇳. In a couple of years ahead, producing iPhones in India 🇮🇳 or in Africa to export them to China 🇨🇳 will be cheaper than exporting them from the United States 🇺🇸 to China 🇨🇳.

The difference of competitiveness and productivity between the two countries is a normal outcome of the difference of their economies: the United States 🇺🇸 one is a more mature industrial economy while the China 🇨🇳 one has been under the process of industrialization for the last 40 years; it is now transitioning to a more mature economy…

In the next couple of years, the Chinese economy will entirely achieve its transition to a more mature industrialized economy in reaching the same kind of competitiveness and productivity of the United States 🇺🇸. Europe and Japan after their reconstruction following the World War II went in the same path that China 🇨🇳 is experiencing now.

In a couple of years ahead, after achieving its transition, China 🇨🇳 will become a mature economy like the United States driven by its domestic demand instead of investments and exports of international trade… Even by becoming a more mature economy, the trade deficit between the two countries may not be significantly reduced. Because American companies may not be competitive in exporting their products and services to China 🇨🇳 instead of producing them locally or exporting them from another low cost country to China 🇨🇳 …

So if I was a President Trump adviser, I would have done exactly what Kissinger did: preparing the US economy to take advantage of the China evolution instead of confrontation. Of course such evolution is now different compared to what it has been in the last 40 years… America can still benefit of the Chinese economy transition with more efficient strategies and outcome compared to what can bring a self destruction trade war…. None of the 2 countries will benefit from an escalation of trade war…