Who Holds The Cards In The Trade War: U.S. Or China?

He who produces or he who consumes. Who holds the power? If China cut off the United States, shelves could go empty in weeks. If the U.S. closes its doors to China, the country’s income would collapse ushering in a severe depression.

So should American’s count their blessings as they are showered with inexpensive goods or is “the customer always right”?

Tonight we will have our answer. Visit the ZeroHedge homepage tonight at 7pm ET for our Premium China Debate with Carnegie Endowment’s Michael Pettis and Z-Ben Advisors’ Peter Alexander. The event will be moderated by Michael Green of Simplify Asset Management. Each has studied China for decades and will provide the respective bear and bull case for the burgeoning superpower’s economic growth prospects. They will also weigh in on the ongoing U.S.-China trade war.

Bear Case From Pettis:

• China’s past economic success was driven by strong supply-side growth, especially during the 1980s to 2000s.

• The current major constraint is on the demand side, particularly domestic consumption, which is historically low.

• Weak consumption makes it difficult to grow the supply side without:

  • Increasing investment, which China is reluctant to do.

  • Expanding the trade surplus, which other countries are unwilling to accommodate.

• China is caught in an “Albert Hirschman trap”:

  • Successful growth models eventually become obsolete.

  • Countries often struggle to transition away from outdated models due to political and economic barriers.

Pettis on Trump’s tariffs:

3/14
They are simply one of many industrial policy tools designed to tax consumption and subsidize production, and as such can be expansionary under certain circumstances and contractionary under others. In fact other policies can be much more effective.

— Michael Pettis (@michaelxpettis) April 3, 2025

Bull Case From Alexander:

• Massive leaps in automation and AI: DeepSeek, fully autonomous Shanghai port, etc.

• Influx in private capital investment from abroad, which continues to persist.

  • Recent demand for fixed income products — bonds from the government and banking sector — has naturally suppressed interest rates as opposed to artificial suppression by western central banks.

• Pundits calling for Chinese collapse for decades. Never materialized and in fact the opposite has been true.

• Chinese consumers are beginning to purchase Chinese products, which will lead to a higher standard of living domestically while reducing the amount of available goods for international consumers (like the U.S.).

We will see you tonight at 7pm ET. Sub to ZH premium or pro now so you don’t miss it.