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Winston Mok

The rapidly arrived at pause in the US trade war with China debunked the myth that international trade benefits mainly exporters. Any voluntary trade has to be advantageous for both buyer and seller.
While it is doubtful US President Donald Trump can clinch his long-coveted Nobel Peace Prize, if he allows a full-scale trade war with China to drag on until the end of the year, he should have a fair shot at the Nobel Prize in economics for launching a bold experiment in global commerce and proving empirically (by contradiction) key principles in international trade theory.
While we may not have the benefit of witnessing empty store shelves across America this Christmas, it would be revealing to conduct a thought experiment on what a definitive US trade war “win” would look like.
Imagine an effective embargo, say through a 150 per cent tariff on all imports to the United States. And that all nations accept this magnanimously, allowing US goods tariff-free entry into their countries even as the US closes its market. In such a world, the US should enjoy a trade surplus with every partner. What would such a “prosperous” US look like?
For a start, without affordable fast fashion from the likes of Shein and Temu, many American women might return to sewing their own dresses. Despite the strong presence of Japanese and European sewing machine brands, Singer remains a leader in the US market. However, like its peers, Singer’s production has largely shifted to Asia. Re-establishing US manufacturing on a large scale may prove challenging without components from Asia.
A few generations ago American stay-at-home mothers may have had the interest, skill and time for sewing but there have been dramatic social changes since then. In 1950, only about a third of American women worked. Now, 58 per cent do – over 77 per cent for prime-age women (25-54 years old) – representing 47 per cent of the US workforce. Working women may not have the time and energy to sew. Would a doctor or tech professional want to spend time on making clothes?

The abundance of pre-owned clothing in the US presents a valuable opportunity. Thrift stores, consignment shops and online resale platforms may partially meet consumer needs. For those who can afford foreign travel, buying clothes overseas would be expedient.
Apparel shopping would become a key agenda. Huge shopping malls might spring up on the Canadian and Mexican side of the border with the US, offering global merchandise from fashion to electronics.
Americans’ outbound tourism, including spending on goods and services, is reflected in the US current account. The reduced domestic spending on clothing would partly be redirected towards expenditure overseas, benefiting foreign markets rather than US retailers. This shift would reallocate the associated line item in the US current account from merchandise trade to import of services. What end would such an inefficient shift serve, other than to deprive Americans of retail jobs?
The US is unlikely to become a garment powerhouse. But it may expect to continue its dominance in high value-added products such as aerospace, medical devices and pharmaceuticals, right?
These, however, are often dependent on foreign components and ingredients. Boeing, for instance, relies on foreign-sourced engines and parts to assemble its aircraft; 35 per cent of the Boeing 787 is made in Japan. And US medical devices are often built with imported electronic modules and electromechanical components; it is challenging to localise production of some of these. Most active pharmaceutical ingredients for US drug manufacturing are imported.
Without imports, it would be difficult for the US to continue operations in these industries, let alone maintain their export positions. How would the US sustain its semiconductor industry without the machines from the Netherland’s ASML Holding? How would the US electric vehicle industry grow without imported batteries? How would a range of manufacturing industries continue in the US without imported rare earths?




The age where a country can make a sophisticated product from A to Z is long behind us. Complex products are put together through interdependent cross-border flows in the global network. It is often imports which make a country’s exports competitive. This is especially true for the complex technology-intensive industries where the US thrives.
With deep and wide supply chains, China is less dependent on foreign inputs than most. Still, where would China’s smartphone and laptop computer industries be without foreign components?
More than bilateral trade balances or even the ability to bear prolonged pain, it is robust supply chains that shape the relative strengths in any trade war. US industries are more dependent on China for critical components and ingredients than the other way around. Imposing high tariffs on Chinese products hurt US industries in profound ways, even without any retaliation from China.
The backwards extension for some industries may be possible but will take years. How will US companies survive in the meantime without imported components or ingredients? Many American companies, large and small, will have gone under before the desired “reshoring” materialises. Neither the atrophy nor building up of supply chains happens instantaneously but unfolds over decades.
Tariffs are not the versatile leverage Trump imagines. Far from ushering prosperity into the US, tariffs bring untold hardships to American consumers and industries. The paused experiment shows no nation thrives in isolation. Trade barriers only hurt the American industries Trump claims to protect. It is cooperation, not confrontation, that sustains economic competitiveness.


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Americans might have to make their own clothes, and industries dependent on imports – from aerospace to pharmaceuticals – could collapse


Americans might have to make their own clothes, and industries dependent on imports – from aerospace to pharmaceuticals – could collapse.


Donald Trump

US-China trade war

US-China trade war: All stories

US-China trade war: Opinion

US-China tech war

US-China decoupling

US-China relations

Trade

China trade

China tariffs

US-ally trade wars

Donald Trump’s China policy

China manufacturing

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Boeing

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Rare earths

Shein

China

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Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


What would a US trade war ‘win’ really look like for Americans?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Americans might have to make their own clothes, and industries dependent on imports – from aerospace to pharmaceuticals – could collapse

Americans might have to make their own clothes, and industries dependent on imports – from aerospace to pharmaceuticals – could collapse