The Impacts of the Trade War and the COVID-19 Epidemic on China-U.S. Economic Relations*

The China-U.S. trade war reduced the Chinese growth rate from 6.9 percent in 2017 to 6.1 percent in 2019. The COVID-19 epidemic has lowered the rate further to 1.8 percent in the first half of 2020 and to a projected 3.4 percent for 2020 as a whole. The trade war caused only a very slight decline in the U.S. growth rate in 2019, but the COVID-19 epidemic has resulted in a projected contraction of 5.3 percent in 2020. Assuming that half of the Chinese exports to the United States were halted, it would imply a total loss of Chinese GDP of almost 1 percent, or approximately US$135 billion (in 2019 prices). Assuming that half of U.S. exports of goods to China were halted, it would imply a loss of U.S. GDP of 0.22 percent, or approximately US$47 billion. The costs of the trade war are higher for China than for the United States both absolutely and relatively. The loss of Chinese GDP due to COVID-19 in 2020 may be estimated as 3.5 percent of its 2019 value, or US$0.5 trillion. The corresponding loss of U.S. GDP may be estimated as 8.1 percent of its 2019 value, or US$1.73 trillion.