China can cause more damage to the United States

The United States cannot win the trade war because China can cause more damage to the United States. China is a huge holder and purchaser of American debt. If China begins to sell or stops buying U.S. treasuries, their value will fall, and America’s ability to raise money to fund itself will be weakened. As a result, there would be a surge in interest rates; this would cause substantial damage to the U.S. economy.^[1] If America continued to escalate the trade war, they would be very vulnerable to retaliation outside of tariffs. China also has significant advantages for outlasting the United States in the trade war. Whilst its GDP is smaller, its current growth is much faster and so can absorb a bigger shock. China also has less need to worry about the political ramifications of job losses and price rises due to the strong power of the central government. The threat of retaliation outside of tariffs and the unsustainability of the trade war for the United States means that it cannot keep up the war for long enough to cause a change in China’s behavior. Despite the potential benefits of winning a trade war with China, the United States cannot risk having its economy and political agenda damaged by a more withstanding country.

[P1] China can cause more damage to the United States by selling U.S. treasuries. [P2] China can outlast the United States. [P3] The trade war is bad for the United States because it cannot win.