US-CHINA TRADE WAR


“In a trade war, everybody loses and nobody wins”…this quote and many similar to it, are often the words respected economists use to describe the outcome of any trade war the world has encountered.


Will this latest one started by President Trump end in the same way? And just as important, how did he start one?


It is worth looking at how President Trump has even   and Trade (GATT) was formed, which eventually became the World Trade Organisation (WTO), where systems were created so that trade wars could not happen. Despite these rules, there still have been minor trade wars over the years, but none so far have ever developed into the anything like the current situation could possibly escalate into, and that is what is very much troubling the world economy.


To target China, Trump has resorted to using Section 301 of the US  This doesn’t mean the US has completely ignored the WTO, they have made a complaint to them against Chinese licensing policies that put US companies at a disadvantage. China, initially urged the US to seek a diplomatic solution to these issues, warning it would retaliate with its own trade sanctions. On 6 March 2018, in responding to fears that the  steel would antagonise other countries, President Trump said “We’ll do it in a very loving way. It will be a loving, loving way. They’ll like us better and they’ll respect us much more”.


These words sound, at best, like the words of a very naïve man, but possibly more worrisome for the world, someone who clearly has not done much research on the outcome of past trade wars.


Just look at the Dow Ind market for an example of the volatility it is causing (Chart 1).


  than his own top economic adviser, Gary Cohn, who resigned over the 





Source: (c) Barchart.com


26 | ADMISI - The Ghost In The Machine | March/April 2018


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