Why this trade war won't be a full-blown one

Who will blink first in this high-voltage trade war of words between the US and China? No clear answers.
History suggests no one wins in a trade fight as better sense prevails.

President Donald Trump on Sunday claimed that China would take down its trade barriers because it was “the right thing to do”. Beijing has said it's fully prepared to respond with a “fierce counter strike”. Even Chinese state media has warned of "pain the US will remember".

Analysts warned this drama would be a long-running one. However, there are concrete signs that it's unlikely to be an all-out war, according to an Elara Capital report. Let's figure out why.

An IMF estimate says a 10 per cent generalised tariff rate as against 1.6 per cent currently will drive down US GDP by 100 bps as well as reduce GDP in rest of the world by 30 bps in the long run.

As much as 88 per cent of job losses in manufacturing in recent years in the US have been put down to growth in productivity and NOT trade. So, the claim that trade protectionism will save jobs appears to ring hollow.

Bilateral trade and investment treaty between the US and China would give both a level economic playing field. That's the way forward, says the report. Anything that hurts China will also end up hurting the US, it adds.