A Bargaining Theory of US–China Economic Rivalry: Differentiating the Trade and Technology Wars

Abstract

Abstract This article examines the outbreak and persistence of US–China economic war, which comprises both the trade war, featured with retaliatory tariffs, and the technology war, featured with restrictions on Chinese access to US technologies. Building on the analytical framework of bargaining and war, I argue that different components of the economic war emerged from distinct causes. The outbreak of the trade war was primarily driven by the information problem, characterized by mutual uncertainty and the lack of effective communications. The technology war was largely a result of the commitment problem driven by the existing power’s concern regarding potential future changes in the balance of power. After examining the initiation stage during the Trump era, I further analyze how the economic war has unfolded during the Biden administration. While the prospect of a new trade war seems unlikely as mutual uncertainty diminishes, existing tariffs remain as the commitment problem on trade issues has become more critical. The preventive technology war is expected to persist, reflecting Washington’s ongoing concerns over China’s growing leadership in technology.