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Trade Wars: Who Can Stand the Pain the Longest – China or the USA?


It could be stated with certainty that within the last decade, the international economic landscape has undergone considerable changes, the start of which was marked by the global economic crisis of 2008. According to Hirakawa and Aung (2011), the importance of the newly emerging economies has increased significantly as they strengthen their international influence continuously. Among the countries that are characterized as developing economies, China could be mentioned as the most important figure in the international economic scene.

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The process of financial globalization, which is largely impacted by emerging market economies, allows China to advance and reinforce its position as one of the global economic leaders (Das, 2010). According to Dean, Lovely, and Mora (2017), “China’s ongoing transitions, from bureaucratic socialism to market economy and from a rural to an urban society, have transformed the country into a global economic power” (p. 2). The purpose of this paper is to overview the situation in the global market from the perspective of Chinese influence. Specifically, the essay aims to address the following question: in the context of continuous globalization, who can gain more prominence in terms of economic prosperity – the United States or China?

Background of the Topic

Prior to the development of the main argument of the paper, it is essential to overview the background of the topic of the management of globalization in emerging economies with relevant details. As was already mentioned, the global financial crisis was the important driving factor that indicated the shift in the global economic paradigm (Hirakawa & Aung, 2011). This shift is largely recognized as the reinforcement and the increase of the importance of emerging economies for the international market. Therefore, it is appropriate to define the principal terms in order to put further reasoning in the proper context.

According to Das (2010), the definition of an emerging economy could be formulated in the following way: it is an economy that achieved sustainable development for the period of a decade or more by undertaking sustained macroeconomic reform measures. Accordingly, the most evident indicator of an emerging economy is the sustainable and rapid growth of the gross domestic product (GDP) (Das, 2010).

According to this definition, China could be characterized as an emerging economy. The article by Hirakawa and Aung (2011) claims that emerging economies include such organizations as BRICs (in which Brazil, Russia, India, and China are included) and N-11 (including Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam). It is apparent that among the mentioned countries, China has gained the most success and prominence in terms of developing its economy as well as strengthening and increasing its global position (Shambaugh, 2013).

Additionally, Das (2010) mentions that an emerging market economy (EME) is usually characterized by the success of its external market sector. Other characteristics that should be mentioned in this context are the reliable financial infrastructure of an EME, which does not comply fully with the standards of advanced industrial economies in terms of the level of market efficiency and standards in accounting and securities regulations (Das, 2010).

Nevertheless, such an economy is capable of making a vast economic impact. In general, as Autor, Dorn, and Hanson (2016) observe, “China’s emergence as a great economic power has induced an epochal shift in patterns of world trade” (p. 205). Therefore, it is essential to investigate in more detail what factors influence the current position of the country under consideration as one of the global economic leaders.

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The Development of the Argument

The Decline of the US Manufacturing Employment

The first factor that is appropriate to discuss is the decline of manufacturing employment in the United States. As it is mentioned in the article by Pierce and Schott (2016), the process of decline began in 2001, and it had a considerable impact on changing the trade relations between the United States and China. Particularly, the decline of manufacturing employment has forced the U. S. to change its trade policy regarding imports from China. The authors argue that “industries with higher NTR gaps experience larger employment declines along with disproportionate increases in U.S. imports from China” (Pierce & Schott, 2016, p. 27).

Also, it is mentioned in the study that “the number of U.S. firms importing from China, the number of Chinese firms exporting to the United States, and the number of U.S.-China importer-exporter pairs” has increased considerably (Pierce & Schott, 2016, p. 27). Accordingly, it is possible to observe that China successfully took an opportunity for expansion in the foreign market.

Vertical Specialization of the China-Japan-U.S. Trade

Another factor that is important in the context of US-China trade relations is the concept of vertical specialization. In the research by Dean et al. (2017), the authors dwell upon the definition of production fragmentation, which is described as the “the decomposition of production into separable component blocks connected by service links” (p. 127). Based on this assumption, the concept of vertical trade has emerged, and the authors argue that China’s trade relations with the United States and Japan are developing in this direction.

In particular, it is mentioned that “the foreign content of China’s aggregate exports estimated to be between 25% and 46%,” which makes China one of the largest providers of exported goods (Dean et al., 2017, p. 127). Accordingly, this factor ensures the position of China in the international market to a significant extent.

The Impact of the Chinese Foreign Policy

Despite the fact that this paper primarily discusses the economic aspects of the Chinese prominence in the global economy, it is also of high importance to mention that China’s foreign policy also drastically influences its overall growth as an economic and political power in the world. The study by Heilmann, Rudolf, Huotari, and Buckow (2014) highlights several aspects of Chinese foreign policy. In general, the authors state that China aims to develop a network of organizations and mechanisms across the world under the country’s control (Heilmann et al., 2014). The main claim that is made by Heilmann et al. (2014) is that China builds parallel structures that function as alternatives to the existing organizational structures in the global economy.

Labor Market Adjustment as the Instrument of Strengthening the Economy

The changes in the global economy invoked by the global financial crisis of 2008 have impacted numerous areas of international and domestic economies, with the labor market being no exception. The study by Autor et al. (2016) investigated the Chinese labor market as an example of the structure that was able to adapt to the initial shock of the global crisis and thus to make appropriate adjustments to its structure. Later, as the authors indicate, this adjustment influenced the overall rapid economic development of China in the past decade. Autor et al. (2016) also reinforce the findings from the study by Pierce and Schott (2016), as they mention that the employment rates have fallen in the United States significantly, which caused the increased import from China.

China as the Global Power

As it was mentioned in the paper several times previously, the economic growth and expansion of China to the international market contributed significantly to its status as the global power. The book by Shambaugh discusses this trend in the context of criticizing the opinion of China as the true global power. For example, the author observes the fact that China primarily produces and exports low-end consumer products. However, it appears that the position of the author is not strong enough as, firstly, many of his own claims work against his position and, secondly, the evidence from scholarly sources indicates that China is continuously expanding in the past several years, successfully developing international economic relations and gaining political and economic prominence.

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This paper provides a critical overview of the position of China as one of the most important emerging economies in the world, which seeks to achieve the status of global power. With a thorough investigation of the topic background and all the relevant facts from the scholarly literature, it is possible to state that China is successfully moving in this direction. However, the most important conclusion that could be made from the discussion of the various aspects of the international economy that were made in this paper is that China is more likely to win the “trade war” with the United States; at least, in the current circumstances. The essay provides substantial arguments in favor of the Chinese perspective as it continues expanding its economic and political influence across the world.


Autor, D. H., Dorn, D., & Hanson, G. H. (2016). The China shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics, 8, 205-240.

Das, D. K. (2010). Contours of deepening financial globalization in the emerging market economies. Global Journal of Emerging Market Economies, 2(1), 45-67.

Dean, J. M., Lovely, M. E., & Mora, J. (2017). Decomposing China-Japan-US trade: Vertical specialization, ownership, and organizational form. In M. E. Lovely (Ed.), International Economic Integration and Domestic Performance (pp. 119-132). Hackensack, HJ: World Scientific Publishing.

Heilmann, S., Rudolf, M., Huotari, M., & Buckow, J. (2014). China’s shadow foreign policy: Parallel structures challenge the established international order. China Monitor, 18, 1-9.

Hirakawa, H., & Aung, T. T. (2011). Globalization and the emerging economies: East Asia’s structural shift from the NIEs to potentially bigger market economies (PoBMEs). Evolutionary and Institutional Economics Review, 8(1), 39-63.

Pierce, J. R., & Schott, P. K. (2016). The surprisingly swift decline of US manufacturing employment. American Economic Review, 106(7), 1632-62.

Shambaugh, D. (2013). China goes global: A partial power. London, United Kingdom: Oxford University Press.

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