PhotoTrade was a major issue that Donald Trump rode to a presidential victory in November. He said trade agreements had placed the U.S. at a sharp disadvantage and had hurt American workers.

Trump's biggest beef appeared to be with Mexico, but the trade relationship with China was also one he pledged to overhaul. As President, Trump has not let up, and the two countries -- huge trading partners -- have traded barbed words ever since.

That's led some on Wall Street to fear a potential trade war, with dire consequences for both businesses and consumers.

On CNBC this week, Timothy Moe, Goldman Sachs co-head of Asia macro-research and chief Asia equity strategist, said China views any U.S. border adjustment tax as a threat because it would have a serious impact on the country's rate of economic growth.

Both sides would take some hits

"We also think that, although the U.S. is more important to China than China is to the U.S., China is still important to the United States," Moe said. "If a conflict did develop, it's not just one side that would be bloodied, both sides would take some hits."

An academic task force led by University of California (UC) San Diego professor Susan Shirk has reached a similar conclusion. The group has provided the Trump administration with a set of policy recommendations for dealing with China on trade.

“We are at a critical moment for our two countries, a moment that calls for our government and the public to reassess and reexamine policy toward China,” Shirk said. “We are confident our recommendations will support a stable relationship that is in American interests and help the U.S. maintain an active, positive presence in the Asia-Pacific.”

Getting in the way of bigger issues

Task force members include Democrats and Republicans, many of whom have served every president since the Nixon administration. Its members warn that contentious trade disputes, while creating economic problems for both countries, threaten to get in the way of bigger issues that require cooperation.

For example, the task force says the U.S. needs China's help in keeping North Korean and Iranian nuclear ambitions in check.

While increasing tariffs on goods imported from China might bring some benefit to U.S. manufacturing, the gain could be offset by lower exports if China and other countries retaliate with tariffs of their own. Consumers would also pay more for currently-inexpensive goods imported from China.

Meanwhile, President Trump may be extending an olive branch in an effort to lessen tensions. The White House says Trump has written a letter to China's President Xi Jinping, saying he wants to develop “a constructive relationship that benefits both the United States and China.”


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