[jyl]

Some are saying that because Chinese imports of US goods is much smaller than US imports of Chinese goods, in a simple tit-for-tat tariff war China will run out of bullets first.

That is misguided.

1. Much of the goods that the US imports from China are consumer goods. Large increases in the prices of these will cause enough pain to US voters to force politicians to change course.

2. Chinese consumers are a lot angrier at the US than US consumers are at China. And the former are not voters.

3. US companies are very exposed to China as a key part of their supply chain for goods sold globally, while Chinese companies are not similarly exposed to the US. Think consumer electronics goods assembly. Most semiconductors are packaged in China. Appliances. Etc.

4. US companies have major investments in Chinese subsidiaries and joint ventures that manufacture in China goods for the Chinese domestic market. The US automakers, for example.

5. A devaluation of the Chinese currency can be used to partially offset tariff impacts.

6. MOST IMPORTANT - if tariffs rise to anywhere near to where China is starting to run out of bullets, the US economy will have long since fallen into a recession.

Also, notice that the labor market is very tight in the US at present. Not only is unemployment < 4%, many of the unemployed are basically unemployable (criminal record, drug use, otherwise bottom of the barrel as far as labor goes). Many manufacturing companies are struggling to hire enough reliable, capable employees just to handle existing business. There is not the ability to move tens of millions of manufacturing jobs from China to the US, because we simply don't have the excess labor. And the supply of new US labor may tighten further, depending on immigration policy.