The US-China Trade War: Costs, Causes, and Potential Responses by Tier II Powers

Abstract

The trade war between the United States and China is generating significant costs; it is rooted in the technological revolution based on big data, artificial intelligence and machine learning, which create the grounds for strategic trade and investment policies and geostrategic rivalry; and solutions must be based on addressing the elemental forces being unleashed by this technology rather than on ironing out nominal frictions that have arisen between the United States and China. This note argues for a new Digital Round at the WTO premised on the search for a global digital realm in which all countries have a mutual stake in ensuring its integrity, as opposed to a world of what might be termed “Digitalpolitik” (the digital version of realpolitik), which features walled off realms subject to mutual routine attack, with ruinous prospects for all.

Keywords: trade wars, United States, China, data-driven economy, WTO, big data, artificial intelligence, machine learning, strategic trade and investment policy, geostrategic rivalry, geoeconomics

JEL Classification: F13, F15, F51, F55, K21, K24