Thankfully, it is not a nuclear war. Apparently the Washington Post thinks plans considered by Trump to delist Chinese companies from U.S. stock exchanges and to make it more difficult for the country to trade in dollars will pose an “existential” threat to the country.
While these plans, which put into practice, will almost certainly sink the stock market and further alienate the United States from its traditional allies, it is very hard to understand how this could be an existential threat to China. Chinese companies that are already listed on U.S. stock exchanges are not currently raising capital. If they are delisted, the price of their shares will fall sharply, but that does not directly affect their ongoing operations. Other Chinese companies will presumably be blocked from being listed on the U.S. exchanges, but this was not a major source of investment capital for these companies in any case.
The piece also implies that China’s trade will be seriously impaired if they are unable to conduct it in dollars. It tells readers:
“China’s years-long ambition of internationalizing the yuan has progressed slowly, with only 2 percent of all global transactions conducted in the Chinese currency.”
The piece implies that this amount is small. However, China’s trade is only a bit more than 12 percent of the world’s total. That means that close to 20 percent of China’s trade is already conducted in its own currency (assuming that the bulk of the trade conducted in yuan has China as a trading partner). That is a pretty good jumping-off point. Furthermore, it is unlikely that most of the rest of the world will go along with Trump’s schemes against China. This means that China would have little problem trading with the euro, the yen, or other major currencies.
As a sidebar, these moves should also mean that China should be able to get use of all U.S. patents and copyrights for free, since why on earth would they pay Pfizer and Microsoft for their intellectual property claims in this context. That should be a good boost to its economy and a major victory for free trade.
Anyhow, given the relative strength of China’s economy and the U.S. economy, and their relative standing in the world, this sounds like a great plan to do lots of damage to the U.S. economy and its standing in the world. The impact on China is likely to be relatively limited.