An economic, trade and financial war between the United States and China would be catastrophic for both countries

We imagine an all-out economic and trade war between the United States and China. It would be catastrophic for both countries: The United States imports capital goods, consumer goods and intermediate goods from China. This means that China features in the value chains set up by US companies, and sells to the United States low-end products that the United States no longer produces. Tariffs on all US imports from China would therefore above all lead to an increase in the prices of the goods concerned in the United States ; China could not retaliate with tariffs of the same size as those imposed by the United States, assuming these applied to all Chinese products imported by the United States, as Chinese imports from the United States are small. China could then : Halt production by US companies in China, but this would amount to destroying capital, production and employment in China ; Sell its foreign-exchange reserves in dollars, but this would cause the renminbi to appreciate drastically . In reality, a trade, economic and financial war between China and the United States would be completely irrational given the ensuing costs for both countries .