Is it possible for a long-lasting trade war?

Many people are talking about the ongoing “trade war” between the US and China and the leaders of the two countries have had some very tough words on this issue. Some people focus on the tariffs on steel and aluminium and see this as the start of the trade war; however, I do not think this is the key in the trade relationship between the US and China and I even do not think the fear of trade war would last long.

I think that the key between the US and China focus at the hi-tech sector. The most important and significant advantage of the US, not just in the trade but also in other many sectors (including military), is its hi-tech. Undoubtedly the most advanced and innovative technologies are in the hands of the US. If China has the ambition of catching the US up, China has to catch the US up in the hi-tech field. China has been trying to use acquisitions and merges to get high technologies from foreign companies. The US has been trying hard to avoid such situation from happening (not just from China, but other countries as well), the government shut up the merge between Qualcomm and Broadcomm is one example. The semiconductor industry is the sector where China has a relative disadvantage; and the semiconductor is a very important sector, the technology in this sector is believed to be the driver of the next generation revolution, the AI revolution. All countries, especially China and the US, want to take a lead in this revolution. Therefore, I do not think steel and aluminium, these traditional industries will be the key in the trade relationship between the US and China.

In addition, the US has a democratic political system; therefore, the policies are influenced by the population. If a trade war significantly worsens the population’s life standards on average, the population will turn against the trade war decision, even though it may have a long term positive influence. Moreover, even all politicians may know the positive effects in the long term, their voters may not have the patience to wait that long for the positive effects to come, so if they want to win the election, they have to give up some of these policies. From this point of view, China is more capable to fight a long term trade war.

To conclude, I think the semiconductor industry is the key in the trade relationship between the US and China, and I do not think a wide scale trade war between China and the US has a high probability; and even if it happens, I do not think it can last long.