us china tech JOHANNES EISELE/AFP/Getty Images

Trump’s Economic War of Choice

It is only natural for a dominant power that finds itself in second place to experience self-doubt or a loss of confidence. But as China's nominal GDP surpasses that of the US, Americans will just have to get over it, as the rest of the world did when America became the single largest economy.

OTTAWA – The brewing conflict between the United States and China is typical of zero-sum contests among countries, firms, and individuals. The US is acting under the implicit assumption that if China’s GDP were to surpass that of the US in nominal dollar terms, US economic prospects would be reduced by an amount equal to the margin of China’s gain.

The idea that there needs to be a battle over trade or technological dominance at all is very much in keeping with US President Donald Trump’s approach to economic and foreign policy. The recent arrest of Huawei CFO Meng Wanzhou in Canada itself raises the notion that the Trump administration is resorting to increasingly cutthroat methods to get its way.

Yet lost behind the spectacle of high-profile arrests are a few basic economic facts. For starters, one country’s gain is not necessarily another’s loss. Both the US and China could have vibrant tech sectors that benefit from each other’s innovations. Moreover, China’s economy is a key driver of growth in many other countries, including the US. And given that its economy is already larger than America’s in terms of purchasing power parity, the fear that it will surpass the US in terms of nominal GDP – which is not the same thing as wealth – seems rather beside the point.

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