The Unwinnable Trade WarNovember/December 2019 1051,000 aircraft, just to the United States or to other countries that might
have bought instead from Boeing. China understands this, which is
one reason it hasn’t put higher taris on U.S.-made aircraft. Whatever
the outcome o the trade war, the deÄcit won’t be greatly changed.
A RESILIENT CHINAThe trade war has not really damaged China so far, largely because
Beijing has managed to keep import prices from rising and because its
exports to the United States have been less aected than anticipated.
This pattern will change as U.S. importers begin to switch from buy-
ing from China to buying from third countries to avoid paying the
high taris. But assuming China’s ³² continues to grow at around
Äve to six percent every year, the eect o that change will be quite
modest. Some pundits doubt the accuracy o Chinese Ägures for eco-
nomic growth, but multilateral agencies and independent research
institutions set Chinese ³² growth within a range o Äve to six percent.
Skeptics also miss the bigger picture that China’s economy is slow-
ing down as it shifts to a consumption-driven model. Some manufac-
turing will leave China i the high taris become permanent, but the
signiÄcance o such a development should not be overstated. Inde-
pendent o the anxiety bred by Trump’s taris, China is gradually
weaning itsel o its dependence on export-led growth. Exports to
the United States as a proportion o China’s ³² steadily declined
from a peak o 11 percent in 2005 to less than four percent by 2018. In
2006, total exports made up 36 percent o China’s ³²; by 2018, that
Ägure had been cut by half, to 18 percent, which is much lower than
the average o 29 percent for the industrialized countries o the Organ-
ization for Economic Cooperation and Development. Chinese lead-
ers have long sought to steer their economy away from export-driven
manufacturing to a consumer-driven model.
To be sure, the trade war has exacted a severe psychological toll on
the Chinese economy. In 2018, when the taris were Ärst announced,
they caused a near panic in China’s market at a time when growth was
slowing thanks to a round o credit tightening. The stock market took
a beating, plummeting some 25 percent. The government initially
felt pressured to Änd a way out o the trade war quickly. But as the
smoke cleared to reveal little real damage, conÄdence in the market
rebounded: stock indexes had risen by 23 percent and 34 percent on the
Shanghai and Shenzhen exchanges, respectively, by September 12, 2019.