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The world will soon witness a historic test of wills between China and the United States, two superpowers whose leaders see themselves as supreme.As things stand, China holds a stronger position than many people realize.On the trade front, China's large bilateral surplus with the U.S. could mean that it has more to lose from a trade war, simply because it has more exports that can be penalized.For one thing, China is more economically resilient to the effects of a trade war than it used to be.In terms of international diplomacy, Trump's trade war will help China present itself as the defender of the rules-based international order and multilateral institutions such as the World Trade Organization.But China will have a chance to play the victim, while arguing that the U.S. now poses the single largest threat to the global trading system that it helped create. And if a U.S.-initiated trade war drags on, China's case will become only stronger as more countries suffer the disruptive effects of tariffs.Of course, China may choose not to fight Trump's trade war at all. If the U.S. does agree to any military concessions, China's strategic position will be strengthened.
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