Why We’re Going to Lose the Trade War with China

Paul Krugman: “There is, however, one big difference between Trump’s trade policy and China’s. Namely, the Chinese appear to know what they’re doing.”

“It should have been obvious from the beginning that if America were to get into a full-scale trade war with China, the Chinese would have the upper hand. For one thing, in real terms China has the bigger economy.”

“Furthermore, while our economies are interdependent, America is more vulnerable to a rupture than China is. True, Chinese industry has relied to an important degree on sales to the United States. But the U.S. economy is dependent on China for critical inputs, above all those rare earths.”

“And here’s the thing: China can quickly compensate, at least in part, for the loss of the U.S. export market by stimulating domestic demand. Given time, America could wean itself from dependence on Chinese inputs — but doing so would take years.”