The Danger Of The Escalating Trade War.

Author:Gochnour, Natalie
 
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When I think of the People's Republic of China, my mind goes to lots of places. I think of communism and the country's red flag with gold stars. I think of the Olympics, both as a venue and remarkable athletes. I think of rice and tea and even Peking duck (yes, I've tried it before). I think of intellectual property disputes, the two-child limit, and the brilliant Shanghai skyline, framed by the waterfront of the Bund. But mostly, I think of the world's most populous country--approximately 1.4 billion people ... about one in every five humans on planet Earth.

With a population like that, there was once a time when China comprised much of the world's poor people. Today, thanks to the introduction of market reforms, China has moved into the ranks of the global middle class. It's an international success story, as an estimated 800 million people have been lifted out of poverty over the past four decades.

I saw some of this success firsthand during a business delegation visit to China in 2010. We attended the world's fair-known as Expo 2010 Shanghai China. The tallest and most impressive pavilion in the expo was by far the Chinese pavilion, known as the Oriental Crown. It cost $220 million (US dollars) to build, stood 63 meters high, and was the largest display in the history of the World Expo.

While I found the international pavilions interesting, the massive parking lot outside the Expo was of greatest interest to me. There I saw thousands of buses--though it seemed like tens of thousands--that had transported thousands of people from inland China to see their country featured prominently at this important international gathering. China's middle class showed up in droves.

I share these observations to make a point. China is big, proud, and ambitious. That's why I'm so concerned about the escalating trade war between the US and China. What started as a 25 percent tariff on $34 billion worth of goods in July 2018 has now grown to 15-25 percent tariffs on $361 billion of goods. This December, $156 billion more products will be subject to a tariff.

Moody's Analytics' chief economist, Mark Zandi has called US-China trade relations "trade war chicken." Each country dares the other and in the end, either one prevails, or both get hurt. It's never a win-win.

Mr. Zandi estimates the trade war has already done meaningful damage to the US and global economies. He estimates that in the past year, the trade war has shaved off 0.3 percentage points from...

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