Trade War Won’t Dent China’s GDP
To see the conflict’s true toll, look at rising debt instead.
The two economies are deeply intertwined.
Photograph: AFP/Getty Images
Analysts are trying urgently to evaluate the potential impact of a full-fledged trade war on the Chinese economy. This typically involves estimating how much various tariff scenarios will reduce China’s GDP growth, with current estimates ranging from the minimal, 0.1 or 0.2 percentage points, to the substantial — as much as 2 percentage points.
This is probably the right way to evaluate the impact of external shocks on other countries. For China, however, it’s wholly inappropriate. The fact is that Chinese GDP will be unaffected by a trade war with the U.S., no matter how severe, because the government will do whatever it takes to meet its growth targets.