If they dumped dollars they would disrupt us, but they would take a bath on the transaction. As they start dumping the value of all the rest of the dollars they haven't dumped yet would be much lower.
Also to the extent they make it difficult for us to buy from them (or to the extent that they make us not want to buy from them) they lose their biggest market and you get massive unemployment in China.
Of course if they where willing to try war, they have already decided to take the economic hit, but it wouldn't just be losing the US and Taiwan as trading partners. Others would refuse to trade, and for that matter we might blockade China. (They have land links but Russia is a much smaller market, North Korea is pathetic, Mongolia, Nepal, Bhutan and Burma have tiny economies, and I don't think they trade a lot or have good infrastructure links with Vietnam or even India.
As for the US, the main loss would be consumer goods. Our lifestyles, temporarily wouldn't be as good, but the suffering would be less than say the rationing that we went through during WWII. There would be some shortages of specific dual use items that the military uses, but for the most part our military would be fine.
If they went for just the economic warfare without real war, well then we start buying more from other nations, and we have higher interest rates but at worst your probably looking at something like the 70s, not an economic collapse. China would be more likely to have a real collapse. We might suffer more in dollar terms (or lets say Euro terms because the value of the dollar would drop so it wouldn't make for a steady comparison), but China would suffer more in terms of percentage of their economy. |
