Hot Take: The US could very easily collapse the Chinese economy through a trade war. Now let me explain how.

There are two key statistics. First is that the USA imports about $500 Billion from China. Second is that the total exports of China are around $2 Trillion or about 20% of the $9+ Trillion Chinese GDP.

So how might the USA go about a trade war?

[1] Exporting to the USA is a privilege granted by the USA, it’s not a right. So the USA can impose a 100% ban on Chinese imports. This is the first action.

[2] Exporting to the USA is a privilege granted by the USA, it’s not a right. So the USA can impose a 100% ban on imports from ANY country that trades with China. This is the second action.

[3] Any country that has a security agreement with the USA must cease trade with China if the security agreement is to continue. This is the third action.

[2] and [3] above will make at least another $500B in Chinese exports disappear.

So within 12 months more than 10% of the Chinese economy disappears. And we are only getting started.

[4] With the above, the Chinese currency collapses. While China would devalue it’s currency to maintain some level of competitiveness, it won’t solve the problem. The ‘game’ is now not the lowest price but does the country of manufacture have access the the USA/western market. With inflation, bank collapses from non payment of Real Estate and Manufacturing debt and significantly higher social expenses, China will begin to look inward in an attempt to stabilize the economy and stabilize society. New exports activities will be modest, locking in the economic collapse.

[5] And it gets worse. With the collapse of the currency AND the absence of dollar generating exports, China will find oil and raw material imports very expensive and likely only available COD (which increases dollar outflow). High import costs make export manufacturing very uneconomic. So the crisis gets worse.

[6] The final act is to outlaw the use of any major western currency (dollar, euro, yen, etc) for the settlement of any Chinese debt or material purchase that occurs after the start of the Trade War. This forces China to use scare dollars to pay off maturing debt and makes imports even more expensive and logistically awkward to obtain. For example, tough to pay for the needed oil and the western ships needed to carry the product.

So we have a China that directly loses at least 10% of the economy. Every dollar in export likely provides several dollars to the internal economy — wages, rents, etc. are local expenditures. So, it’s likely another 20% reduction (at a minimum) in internal economic activity occurs. Which creates a snowball effect. Stores close, apartment owners default, government jobs disappear, etc. Something worse than the USA depression of the 1930’s.

With no way out. Society cohesion and the Party structure may be compromised, possibly terminally. Think USSR 1991 - 1997. Collapse.

So how did it work out for the USA? No big deal. A couple of trillion added to the debt (maybe) and some geopolitical issues but otherwise no real disruption. Here is why:

[1] We don’t need anything from China. Some transitional bumps but EVERYTHING that came from China can be sourced elsewhere.

[2] We get to spread around the rest of the world about $1 Trillion of new export potential ($500B to the USA and $500B from our Allies). World merchandise exports x/China are around $14T, so the world x/China gets a sudden 8% boost in exports. Boom times.

[3] The USA will have to help countries around the world with the initial impacts of losing China based manufacturing assets and the related export volumes. Same with retailers dependent on Chinese exports in the transition period. Ditto for those who sold resources to China. These are opportunities in some cases and problems to be solved in other cases. Just time and money.

Ok, it’s actually a bit more complicated (like Chinese assets outside China will be frozen and used to pay non Chinese holders of assets locked in China) but the above are the major lines of attack and they will work.

But, surely, China can do something. Nope. Remember at the top of this answer we limited this to a trade war. Without war, China is toast.

Now a moment off topic. A full scale trade war will leave China a very troubled place with nukes and an army. People backed into a corner sometimes act irrationally and not in their self interest. A lot of us were very surprised that the USSR imploded without some serious military or nuclear adventure. There is no rule that says it always works out this way.

In real life, the best trade war would b a 5 or 10 year plan to put pressure on China to do what ever it was we wanted them to do that caused us to start the trade war. As the trade war increases over time, the broad swath of economically privileged Chinese will come to understand the end game and will cause China to take those actions necessary to resolve the dispute in favor of the USA….the safety and wealth of the rich will trump the state in most cases.