US launching an all-out trade war: Case of status anxiety?

IF each side holds fast to what it says it will do to the other, China and the United States are in for a trade war, the likes of which have not been seen since the 1930s. It will go far beyond what was initially proposed: The US imposing tariffs on US$50 billion in Chinese imports and Beijing retaliating one-to-one.

Now, US President Donald Trump warns of a further 10 per cent tariff on an additional US$200 billion of Chinese imports and faces a similar retaliation from China. Economists estimate these tariff measures would trim China's economic growth by 0.3 percentage point and US output by 0.2 of a percentage point.

What does the Trump administration really want out of this exercise? Ostensibly, it is about the trade deficit, Chinese intellectual property (IP) theft, and China's industrial policy (known as Made in China 2025). China currently sells about US$500 billion of goods annually to the US, while the US sells about US$130 billion to China. So US has a rather large merchandise trade deficit with China - it stood at about US$375 billion last year. And it is true that China sometimes uses coercive tactics to gain access to IP. But deficits and IP issues can be settled by negotiations, and Beijing has shown itself willing to talk about them.