The current trade war between the USA and China is perceived to be motivated by the US desire to curtail the bilateral trade deficit, on the assumption that reducing the deficit boosts economic growth. This flawed proposition indicates gross misunderstanding of the national income identity and the basic principles of macroeconomics. The imposition of tariffs will not reduce the trade deficit as the assumptions and conditions required for a smooth working of the process are unrealistic and counterfactual. The notion of an economic Thucydides trap is put forward to explain why the trade war is motivated by US apprehension about China’s rising economic power.
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