China’s Slowdown Has Changed the Trade War

For the first time in more than four decades , China ’s share of the world economy is shrinking.

This weakening economic outlook in China gives the United States new ways to constrain Beijing .

Trump has floated tariffs as high as 60 percent on all Chinese imports and ten percent tariffs on goods from everywhere else.

Chinese officialdom has pivoted from insisting that nothing is wrong with domestic demand to assuring that it recognizes the seriousness of the shortfall, especially in household consumption.

But shifting China ’s economy away from investment-led growth will not happen quickly, and the support offered to households so far appears unlikely to raise incomes and drive more sustainable spending growth.

Washington has made gains on Beijing in the race for technological leadership in key industries.

The American public will either pay higher prices, driving up inflation, or simply reduce household consumption.

Beijing has shown it is prepared to use currency intervention to retaliate against U.S. tariffs.

Beijing can still choose to make Chinese exports even cheaper by reducing the interventions its central bank regularly makes to prop up the renminbi.