It is difficult to know what will happen with a full-scale trade war. Do they inflate upward too without distortion? Trade wars occur with just a limited number of players. It would at best be as leaky as the U.S. border to illegal alien entry and dope importation is. During the sanctions on Iraq the weak died and Saddam Hussein grew stronger. China may reach out and touch some ones-like Europe, and dump product there, while American movie releases in China are cut 50% from 10 a year to 5. If the U.S.A. doesn’t make anything anymore and provides services mostly that may not be affected by trade war; China might not let US accounting and security firms handle much of their government contracts anyway.
Some nations would eventually grow stronger trade relationships with the United States while others would weaken. The 1929 stock market crash was the result of an investment bubble and concentrated wealth that burst. Companies didn’t really have the cash to back up the irrationally exuberant expansion of the gilded age. The concentration of wealth in the U.S.A. now is about what is was then.
So a trade war is something like a stress test that the flimsy don’t want. In 2008 many speculative businesses collapsed along with home derivatives and cheating big banks that were running Monte Carlo algorithms for dark pool trading. The real problem is the environment though- and a failure to adapt economics to synergize with ecospheric sustainability. Interestingly the inventor of the Gaia hypothesis thinks now that people should wimply give up trying to save the ecosphere because it’s too late, and actualize their ant-like nature and build hives that will survive the total collapse of green life on Earth and mass desertification within two centuries. Global trade and the vast eco-destructive gases released into the atmosphere conducting it accelerate greenhouse break down of the ecosphere. Local production is more efficient.
If Canada didn’t act like a wise-guy foe they might benefit from a trade realignment. sadly I think they are lost to the dark side of the force. A trade war could create a black market in cheap MP3 players. I just bought a couple from an unnamed country for a $1.50 each yet will need to wait several weeks for them to arrive I guess. It is possible the price could double for that in the future with tariffs.
Because of all the global and regional trade agreements already in place, a return to the way it was before would seem like a trade war, though it formerly was SOP. Not being an economist I will need to wait for the next Stiglitz or Krugman book to find out what’s going on.