Effect would be felt in countries throughout globe, warn experts
Experts worldwide have cautioned on the deadly impact of a possible trade war between China and the United States after U.S. President Donald Trump signed a memorandum last Thursday to impose tariffs on up to billion imports from China.
Henry Levine, a senior advisor at consulting firm Albright Stonebridge Group and a former U.S. deputy assistant secretary of commerce, said he does not think unilateral imposition of tariffs under Section 301 of the U.S. Trade Act of 1974 is the way to resolve the issues.
"A trade war would be immensely damaging to China, the U.S. and the world," he said. "Supply chains would be disrupted, factories would close, people would lose their jobs, and global financial markets would fall. No one can win a trade war."
Wayne Morrison, a specialist in Asian trade and finance at the Congressional Research Service in the U.S., said it is definitely not in the interests of the two countries to engage in tit-for-tat escalation because it could spin out of control, hurting both sides, and the global economy as a whole.
"How bad it could get, nobody knows. The U.S. and Chinese economies are very interconnected. We cannot impose sanctions against each other without hurting ourselves as well," he said.
"And it's not just China and the United States that would get hurt by a trade war－it would include all the other countries whose firms are part of the global supply chains that connect through the United States and China," he said.
Fredrik Erixon, director of European Center for International Political Economy, warned that the U.S.' punitive trade protectionism measures against China could have a "dampening effect" on global trade, hitting the worldwide vehicle of growth that ever since the financial crisis had brought difficulties to recover.
"The measures outlined now by the U.S. could have a dampening effect on global trade, hitting a vehicle of growth in the world that ever since the economic crisis starting from 2008-09 has been causing difficulties to let the economy recover," said Erixon.
"Absolutely, the scale and scope of current measures planned by the U.S. government should make every trade observer to be worried," he said.
"It may be a fraction of world trade, but they are uncontrollably wide and a harbinger of what yet may come."
Morrison said Trump should have stuck to the intellectual property rights theme, instead of focusing on bilateral trade deficit and wanting China to agree to a 0 billion deficit reduction plan "which makes no sense from an economic perspective".
He suggested the two countries should immediately convene a session of the Comprehensive Economic Dialogue and make IPR the central focus.
"If the two sides agree to use this forum, perhaps the threatened sanctions can be postponed and even canceled if progress is made," he said.
Eswar Prasad, a senior fellow at the Brookings Institution, echoed the view, saying the U.S. focus on narrowing the bilateral trade deficit puts China in a difficult position since that deficit is driven as much by macroeconomic conditions in the two countries as by trade policies.