Finally, let’s admit that nobody is perfect – the reasoning above still leaves China with an extraordinary 1 trillion USD global trade surplus in manufactured goods (as opposed to the balance on intermediary goods and components that is lower). Some export trade diversion also helped Chinese exporters, compensating reduced sales to the US. That could be a source of vulnerability over trade conflicts with the United States and other trade partners, but it is also a sign of economic strength.
In that sense, and in that sense alone, the tariffs have not made a dent in China’s mercantilist economy. In fact, if household savings remain at a high level while investment slows down, which is the case, and if the debt pyramid does not collapse (the state is increasingly cautious as we shall see about new credit to the economy), excess savings are likely to produce an even larger external account surplus.
The answer to the question of who "wins" and who "loses" is likely to be relative, not absolute. As we shall see, decoupling – or the denial of critical technologies, whether these are embedded in software, components, or intangibles such as advanced education and research – is likely to be a question with more absolute answers in a longer term perspective. For the time being, it is important to dissect who won and who lost in what will soon be a three-year span of trade conflict, rather than a "war".
1To be developed in part 2 of this blog series
2Lan Yisheng, “Responding to the Trade War, China has Favorable Geographical Condition and Popular Support 应对贸易战，中国占据地利与人和”, April 08, 2019, available at http://www.cssn.cn/hqxx/201804/t20180408_3899484_1.shtml
3"How to Respond to this Unavoidable Trade War - Interview with Yu Yongding at the Chinese Academy of Social Sciences 如何应对这场不可避免的贸易战？ ——专访中国社会科学院学部委员余永定", June 7, 2018, available at http://www.cssn.cn/jjx/jjx_gd/201807/t20180706_4498089_2.shtml
4Yao Zhizhong, “Recognition What the Victors are in the Trade War 打赢贸易战的标志”, July 11, 2018, available at http://www.cssn.cn/gj/gj_hqxx/gj_tt/201807/t20180711_4501126.shtml
5See coming part 4 of this blog series.
6See coming part 3 of this blog series.