The Thucydides Trap as an Alternative Explanation for the US–China Trade War

2020 ◽  
Vol 12 (1) ◽  
pp. 42-55 ◽  
Author(s):  
Imad A. Moosa
Keyword(s):  
Alternative Explanation ◽  
Bilateral Trade ◽  
National Income ◽  
Trade Deficit ◽  
Basic Principles ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
Thucydides Trap ◽  
Trade War

The current trade war between the USA and China is perceived to be motivated by the US desire to curtail the bilateral trade deficit, on the assumption that reducing the deficit boosts economic growth. This flawed proposition indicates gross misunderstanding of the national income identity and the basic principles of macroeconomics. The imposition of tariffs will not reduce the trade deficit as the assumptions and conditions required for a smooth working of the process are unrealistic and counterfactual. The notion of an economic Thucydides trap is put forward to explain why the trade war is motivated by US apprehension about China’s rising economic power.

Causes of U.S.-China trade imbalances: a review

2020 ◽  
Vol 13 (1) ◽  
pp. 37-44
Author(s):  
Yongqing Wang
Keyword(s):  
Bilateral Trade ◽  
Trade Deficit ◽  
Previous Literature ◽  
Common View ◽  
Content Type ◽  
Trade Imbalances ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
Trump Administration

Purpose It is a common view to Trump administration and public that devaluation of Chinese currency is the origin of the US trade deficit. However, the previous literature does not support this common view. To better understand the causes of the US trade imbalances with China, this study aims to review the previous literature focusing on the causes of bilateral trade imbalances between the USA and China. Design/methodology/approach Review previous literature according to the different reasons that each paper studies. Findings Based on the previous literature, the Chinese exchange rate is not the main reason for the US trade imbalances. The official US trade figures overestimate the amount of deficit. The actual causes for the US trade deficit with China perhaps should be the relocation of production to China, low saving in the USA and high saving in China, and the US dollar as the international currency and reserve. Originality/value By reviewing previous literature, the authors could better understand the puzzle of the US trade deficit with China.

Currency Manipulations and Bilateral Trade Between China and the USA

2017 ◽  
Vol 52 (3) ◽  
pp. 171-184 ◽  
Author(s):  
Masoud Moghaddam ◽  
Jie Duan
Keyword(s):  
Exchange Rate ◽  
Gravity Model ◽  
Bilateral Trade ◽  
Trade Deficit ◽  
The Us ◽  
Spot Exchange Rate ◽  
Main Culprit ◽  
Long Time ◽  
The Usa ◽  
Strong Relation

The US trade deficit with China has existed for a long time, and its dollar value has been on the rise recently. It is widely believed that the main culprit is the manipulated value of Renminbi relative to the US dollar. Towards that end, this article re-examines the spot exchange rate and bilateral trade nexus using the Fourier approximation and a variant of the well-known gravity model during the sample period 1993: q1–2014: q1. Although China’s exports to the US Granger cause the exchange rate in a co-integrated space, the findings of a vector error correction model indicate that there is not a strong relation between the two. Indeed, within the aforementioned sample, only 15.52 per cent of changes in China’s exports to the USA are attributable to changes in the spot exchange rate. This is noticeably much smaller than impacts of the other variables utilized in the estimated gravity model. As such, the palpable trade imbalance between the USA and China cannot be single-handedly blamed on the spot exchange rate manipulations.

scholarly journals A real driver of US–China trade conflict

2019 ◽  
Vol 3 (1) ◽  
pp. 30-40 ◽  
Author(s):  
Min-hyung Kim
Keyword(s):  
Transition Theory ◽  
Power Transition Theory ◽  
Content Type ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
Us Hegemony ◽  
Trade War ◽  
Zero Sum ◽  
Hegemonic Stability

Purpose According to the conventional wisdom, trade is not a zero-sum game, but a positive-sum game. By allowing countries to focus on producing the goods that they can produce relatively efficiently, free trade is largely beneficial for everyone involved. Then, why are the world’s two largest economies (i.e. the USA and China) currently engaged in a trade war, which is likely to hurt their own economies? What is the driving force for the trade war between the two economic giants? The purpose of this paper is to offer an explanation of the underlying cause of the US–China trade war. Design/methodology/approach In an effort to make sense of the trade war between the USA and China, the paper draws the insights from the two international relations theories – i.e. hegemonic stability theory and power transition theory. Findings As China continues to threaten US hegemony in the world in general and East Asia in particular, the Sino–US competition for hegemony will intensify over time. As a result, the trade war between the two countries may persist longer than many anticipate. Further, even if the trade war between the two superpowers ends soon, a similar type of conflict is likely to occur later as long as the Sino–US hegemonic rivalry continues. Originality/value The central thesis of this paper is that “US fear” about its declining hegemony and China’s rapid rise as a challenger of US hegemony is driving a US-launched trade war with China. Since the underlying cause of the trade war between the world’s two largest economies is political (i.e. the Sino–US hegemonic rivalry) rather than economic (e.g. US attempts to improve the trade balance with China by imposing tariffs on Chinese goods), the paper contends that the full understanding of the trade war requires close attention to the importance of power competition between the two superpowers.

Beyond Trade War: Reevaluating Intellectual Property Bilateralism in the US–China Context

2021 ◽  
Vol 24 (1) ◽  
pp. 53-76
Author(s):  
Carrie Shu Shang ◽  
Wei Shen
Keyword(s):  
Intellectual Property ◽  
Property Rights ◽  
Intellectual Property Rights ◽  
Trade Agreement ◽  
Republic Of China ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
Trade War ◽  
Organization Framework

ABSTRACT The Economic and Trade Agreement between the USA and the People’s Republic of China (hereinafter the ‘Phase One Agreement’) concluded in January 2020 leaves many important questions unanswered. This article goes beyond narrow textualist approaches and seeks to conceptualize the current trade tension by providing an alternative narrative with a focus on China’s post–Trade War commitments to higher intellectual property rights standards. In particular, it focuses on the bilateral interaction between the USA and China during and shortly after the Trade War and how the interaction impacts China’s legal changes from a transnational law perspective. It further argues that US-reinforced intellectual property rights rules have potentially paved the way for further US–China trade and investment talks. However, in order to better maintain a long-term balance between preservation of policymaking autonomy and regulation of protectionist measures, an approach better aligned with the World Trade Organization framework needs to be pursued.

The US–China Trade War: Impact on India and Other Asian Regions

2021 ◽  
Vol 3 (2) ◽  
pp. 144-168
Author(s):  
Rajesh Chadha ◽  
Sanjib Pohit ◽  
Devender Pratap
Keyword(s):  
United States ◽  
Bilateral Trade ◽  
The United States ◽  
Transport Sector ◽  
Jel Codes ◽  
Policy Responses ◽  
China Trade ◽  
The Us ◽  
Trade War ◽  
The Impact

The growing protectionism globally and the outbreak of a major US–China trade war led Indian exports facing higher tariffs. This article has tried to investigate how India should react to the trade tensions between the two largest economies of the world. This will help policymakers in India to assess the impact of the likely developments and choose between different policy responses. In a bilateral US–China trade war, while both the United States and China stand to lose in terms of GDP, exports and imports, India stands to gain. India stands to lose when the US–China trade war applies also to India, which faces higher tariffs from both. India’s losses increase further when India responds by increasing its tariffs on imports from the United States and China. In fact, reducing own tariffs could be a wiser step. Enhancing productivity measures by raising port efficiency and making trade and transport sector more efficient appear to pay dividend. India gains even more from joining the RCEP-like trading block when the United States and China are indulging in bilateral trade war. Last but not least, US–China trade war seems to affect Asian countries, some positively some negatively. JEL Codes: F13, C68, F14

The Day After Tomorrow: Evaluating the Burden of Trump's Trade War

2018 ◽  
Vol 17 (1) ◽  
pp. 101-120 ◽  
Author(s):  
Meixin Guo ◽  
Lin Lu ◽  
Liugang Sheng ◽  
Miaojie Yu
Keyword(s):  
United States ◽  
Trade Balance ◽  
Bilateral Trade ◽  
Trade Deficit ◽  
The United States ◽  
Real Wages ◽  
Unilateral Action ◽  
China Trade ◽  
Welfare Losses ◽  
Trade War

During his U.S. presidential campaign Donald Trump threatened China with the imposition of high import tariffs on its exports to the United States. To evaluate the repercussions of such an action, this paper uses Eaton and Kortum's 2002 multi-sector, multi-country general equilibrium model with intersectional linkages to forecast how exports, imports, output, and real wages would change if Trump's threat of 45 percent tariffs is carried out. To view plausible scenarios, we evaluate the case of a unilateral action on the part of the United States, as well as a scenario where China retaliates by imposing an equally high 45 percent tariff on its imports from the United States. In addition, because the high U.S. trade deficit with China is a factor that underpins calls for tariff action, we explore simulations where the trade balance is restored to balance as well as a scenario in which the trade balance is unchanged. In all of the scenarios, the calibration exercise suggests that a trade war triggered by high U.S. import tariffs will lead to a collapse in U.S.–China bilateral trade. In all of the scenarios, the United States will experience large social welfare losses, whereas China may lose or gain slightly depending on the effect of trade war on the U.S.–China trade balance. Globally, some small open economies may experience small benefits, while other countries may suffer collateral damage.

scholarly journals US-China Trade War: Causes and Outcomes

2020 ◽  
Vol 73 ◽  
pp. 01012
Author(s):  
Larisa Kapustina ◽  
Ľudmila Lipková ◽  
Yakov Silin ◽  
Andrei Drevalev
Keyword(s):  
Bilateral Trade ◽  
Federal Budget ◽  
Conjectural Variation ◽  
Political Dimension ◽  
Economic Relations ◽  
China Trade ◽  
The Us ◽  
Trade War ◽  
Trade Wars ◽  
Limit Access

The article reviews the chronology and analyses the causes and possible consequences of the trade war between the US and China. The authors identify four main reasons that led to the greatest trade conflict between the two economies in history associated with intentions of the US: a) to reduce the deficit of bilateral trade and increase the number of jobs; b) to limit access of Chinese companies to American technologies and prevent digital modernization of the industry in the PRC; c) to prevent the growth of China’s military strength; and d) to reduce the federal budget deficit. It is confirmed and concluded that trade wars have no winners. Taking into account the two countries’ GDP scale and export volumes, the US-China trade war will come amid a slowdown in the global production and international trade. The article analyses the outcomes of the trade confrontation based on the scenario methodology. The authors identify 4 scenarios by making assumptions about the response pattern and conjectural variation in the bilateral economic relations. The US protectionist policy has its political dimension. The constraints of the bilateral trade is one of the tools for slowing China's military and economic power growth.

scholarly journals Popular nationalism: Global Times and the US–China trade war

2019 ◽  
Vol 82 (1) ◽  
pp. 26-41 ◽  
Author(s):  
Wenna Zeng ◽  
Colin Sparks
Keyword(s):  
Free Trade ◽  
International Agreement ◽  
Chinese People ◽  
Han Ethnicity ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
International Issues ◽  
Trade War ◽  
Popular Nationalism

This article analyses the coverage of the current US–China trade war in the Global Times. Some scholars argue that official nationalism, which stress the unity of the Chinese people, is challenged by popular nationalism, which privileges the dominant Han ethnicity, and that official nationalism is forced to make concessions to popular nationalism. If this is true, then one would expect to find evidence in the coverage of international issues in a ‘popular’ official newspaper like Global Times. The newspaper’s coverage stresses negative features of the USA, but devotes considerable space to the damage that Trump's policies are doing to ordinary Americans. It does not present China as the unique victim of US economic aggression. The coverage stresses broad international agreement for free trade, leaving the USA isolated in adopting protectionist policies. At least in this instance, state-led nationalism remains central and no concessions are made to popular sentiments.

The Impact of the US–China Trade War on the European Union

2020 ◽  
Vol 12 (1) ◽  
pp. 56-68 ◽  
Author(s):  
Sebastien Goulard
Keyword(s):  
European Union ◽  
The European Union ◽  
European Policy ◽  
Trade Disputes ◽  
Eu Member States ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
Trade War ◽  
The Impact

Since April 2018, the USA and China have been engaged in a trade war. Because of the importance of these two countries in world trade, this dispute does affect not only the Chinese and American economies but also the entire world. Several studies have shown the impact of this dispute on different countries in Asia, but little was done to study the effect on European Union (EU) member states. The trade war between the USA and China should not let us forget the trade disputes between Washington and Brussels on one hand and EU–China trade differences on the other hand. This article will take stock of European policy towards the USA and China in this trade war; we will study the consequences of the US–China trade war on the exchanges between Europe and China and analyze the possible diversion created by this trade war for the European market.

scholarly journals THE US-CHINA TRADE WAR AND ITS IMPACT ON THAILAND’S ECONOMY

2020 ◽  
pp. 17-32
Author(s):  
Irina Onyusheva ◽  
Rungnapa Khamboocha ◽  
Nipaporn Muangmutcha
Keyword(s):  
Global Economy ◽  
Economic Effects ◽  
Economic Consequences ◽  
Goods And Services ◽  
China Trade ◽  
The Us ◽  
The Usa ◽  
Trade War ◽  
Trade Wars ◽  
The Relationship

This paper analyzes the economic consequences of the trade war ongoing between the USA and China as applied to Thailand. The paper mainly focuses on the relationship between the global tariffs’ imposition during this US-China trade war as they directly hit several Thai export products as well as the US-China trade war impact on Thai business via dumping goods into Thailand and Thai products intermediately affected by the tariffs imposed on Chinese or US goods. Recently, it has been illustrated by many researchers and economists that trade wars, especially between those waged between such large economies have adverse economic effects on the global economy and international trade. This paper utilizes PESTEL and also causes and consequences analysis to explain the trends of the US or China exports of goods and services to Thailand, Thai intermediate inputs indirectly affected by the tariffs imposed on Chinese or US goods and dumping goods into Thailand as the latter could intensify domestic competition.

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