Professor Miaojie Yu's lecture introduces the origin and development of Sino-US trade war, and how to apply economic models to analyze the impact of the trade war. Professor Yu's lecture focuses on four parts, the origin of the Sino-US trade war, the deep understanding of the trade imbalance between the two countries, a quantitative analysis of the trade war, and the prediction of results under different Chinese coping strategies.

In the first part of the lecture, Professor Yu introduces starting and contents of the Sino-US trade war. In the second part, Professor Yu further lays out the political logics of the Trump team and explains why they are wrong. There are four main logics of the Trump team: the trade surplus is good and the deficit is bad; the Sino-US trade imbalance is due to Chinese subsidies and unfair tariff treatment; the only way to solve the problem is to impose High tariffs; China should stay at the bottom of the international division of labor to serve the interests of the US.

Professor Yu explains that, first of all, the trade deficit is not necessarily bad, and the trade surplus is not necessarily good. The key question is how to use the deficit (foreign financing). With high-quality investment, the economy can achieve rapid growth. Secondly, Professor Yu pointed out that the trade imbalance between China and the United States is due to different comparative advantages of the two countries. In terms of intellectual property protection, China’s identity as a developing country must be taken into account. As for the third logic, Professor Yu compares the policies of the Obama administration and the Trump administration, pointing out that China is already trying to solve the trade balance problem, while Trump’s strategy of “making the faction small” is obviously not wise. Finally, Professor Yu pointed out that it is unfair to keep China in the downstream of the international division of labor.

In the second half of the lecture, Professor Yu introduces one of his coauthored research papers to analyze how China should respond to the trade war. The paper analyzes three scenarios: US imposes high tariffs on all products, China does not respond; US imposes high tariffs on all products, China fights back by imposing high tariffs to the same scale; US imposes high tariffs on all products. China fights back, and increases imports from other trading economies.

Finally, Professor Yu gives policy implications of the lecture. Professor Yu believes that Trump will strengthen his retaliation against China and the current taxation scale is far from the final one. China's best strategy is always fighting back. Professor Yu believes that in the end China will win the trade war. On the other hand, China should further open up by implementing a negative list system, reducing tariffs, and expanding imports from other economies.

Written by: Pengyu Lu

Proofread by: Prof.Miaojie Yu

 Zhengwen Liu