USA–China Trade War in Light of the Limits of the Comparative Advantage Principle

Abstract

The trade war, which antagonizes today the United States and China, questions the free trade principle in international trade. To show the dangerousness of this trade war for the world economy, this paper explores the theoretical limits of the comparative advantage principle by analyzing the limitations of the applicability of the comparative costs and endowments criteria. We conclude that the international trade theories not based on the comparative advantage principle are the exception to the rule and therefore, cannot be used to justify the American positions, except to introduce a certain degree of political considerations. Specifically, we show that the international trade theories, other than the Ricardian theory and the HOS factorial theory, are exceptions to the applicability of the comparative costs and endowments criteria. In light of this argument, one should seek explanations of the war-like trade logic of the Trump Administration in the international political economy. In this perspective, international trade is no longer necessarily a positive-sum game.