Trade Wars: Impact of Interdependence and Asymmetry in Economic Relations on their Outcomes

Abstract

The paper is concerned with the asymmetry in the economic relationship between the United States of America (USA) and the People’s Republic of China (PRC), focusing on the implications of their trade war. The objective is to predict which nation could withstand greater economic pressure and potentially win a severe trade confrontation. Employing a multi faceted approach, the study utilizes the Sectoral Hirschmann index, Regional Hirschmann index, Marginal Propensity to Import (MPM), and Import Penetration index to analyze trade dynamics. The results have shown the increase of China’s export diversifi cation, as evidenced by its Sectoral Hirschmann index with a downward trend, as well as its signifi cantly lower Regional Hirschm ann index, indicating that China is actively seeking to penetrate various international markets, reducing reliance on the USA. Conversely, the USA exhibits a stable, diversifi ed export structure, but its trend of index shows a growing concentration in certain sectors. China’s high import penetration index refl ects its dependency on imports, typical of its role in the global supply chain, while the USA’s lower index suggests strong domestic production. The fi ndings suggest that the USA is more independent in absolute terms, but in terms of trends, China’s proactive economic strategies post-trade war have been more effective, and, if the trends persist, the USA risks losing the trade war in the future. The author concludes by emphasizing the importance of trade diversifi cation for nations to enhance resilience against geopolitical and economic uncertainties.