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Sooner or later, the US will realise it can’t win the trade war

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It is common knowledge that, in a full-blown trade war, there are no outright winners and everyone ends up a loser. It is a zero-sum game where world trade is compromised, global growth slows, jobs are lost and livelihoods ruined. China and the United States will end up even more at odds and global political harmony will be badly damaged. Still, even dark clouds have silver linings and there are good reasons why China should take heart rather than sink into despair.

The odds are that China will ultimately win this war and US President Donald Trump will end up a spent force. It is not just the upcoming midterm elections which matter – and Trump will probably be mortally wounded – but the fact Beijing holds all the key economic cards. China’s solid external position, its pivotal US Treasury holdings and plentiful policy options to fall back on give Beijing a strong hand over the US. If China plays its cards right, it can call Trump’s bluff.

The US might be buzzing with strong growth and full employment, but weak economic links remain. America’s twin black holes – the yawning budget and trade gaps – are getting worse not better, complicating its future policy choices. Trump is turning a blind eye now, but at some stage........

© South China Morning Post