On Friday the Trump administration announced it will impose a 25 percent tariff on up to $50 billion in Chinese goods in an effort to protect U.S. intellectual property and technology. The decision brought an immediate backlash from Beijing. China in retaliation said it will introduce taxation measures of the same scale and strength. As the world’s two superpowers inch closer to a trade war, market experts are asking: Is this a game the United States can win?

I suspect the real answer is twofold: In part, the president wants to be seen as reversing the loss of jobs and intellectual property to China between 2001 and, say, 2010. But since that horse has left the barn, he needs some other animals to round up.

His stated objective is to reduce the size of the U.S–China trade deficit from an estimated $370 billion to $200 billion by 2020.

China’s President Xi Jinping (L) and US President Donald Trump. As the world’s two superpowers inch closer to a trade war, market experts are asking if this is a game the United States can win.
Fred Dufour | AFP | Getty Images
China’s President Xi Jinping (L) and US President Donald Trump. As the world’s two superpowers inch closer to a trade war, market experts are asking if this is a game the United States can win.
There are two obvious ways to play this: (1) China could buy more U.S. goods and services, and/or (2) America could buy fewer Chinese goods and services. Both come with drawbacks for the U.S. economy and the American people. It is hard for U.S. companies to ramp up to export more to China when they are operating at full capacity and have close to no unemployment.

But before evaluating the policy prescriptions for this problem, we must first consider the starting point, which is flawed. The current $370 billion deficit estimate does not account for value-added. When looking at the value-added content of Chinese exports, the U.S. deficit with China is actually only half of what it seems. And if we then add back the U.S. surplus in “invisibles” and how much money the United States brings back from investments in China, the U.S.–China deficit shrinks from 2 percent of U.S. GDP to 0.8 percent, a report from Oxford Economics revealed.

https://www.cnbc.com/2018/06/15/why-china-holds-all-the-aces-in-a-full-blown-us-china-trade-war.html