The biggest damage from a renewed trade war with the United States will be China's swing from 25 years as a net domestic saver to a global net borrower.

More than $1 trillion in stock value was wiped out on Monday due to the collapse of the expected U.S.-China trade deal.  The American government mostly ignored the 600-point drop in the Dow Jones Industrial Average and soybean futures hitting an 11-year low, but China's central bank was forced to inject $3.5 billion into the financial system after foreign investors dumped a record $1.6 billion's worth of mainland shares and its yuan currency fell to its lowest exchange rate to the dollar in four months.

U.S. stock markets on Tuesday recaptured half of Monday's plunge as new data showed that tariffs on China have resulted in deflationary import prices, and President Trump backed his base by granting farmers another $15 billion in aid to offset China tariff retaliation.

Standard economic analysis projects that the U.S. tariff increases from 10 percent to 25 percent on $200 billion of imported Chinese goods will shave just under 1 percentage point off China's growth rate, while the approximately 8-percent average tariff increase on $60 billion of U.S. exports to China will shave 0.3 percent off U.S. growth.

But according to Diana Choyleva of Enodo Economics, this analysis does not take into consideration any potential blowback as China's current account balance that peaked at 9.9 percent gross domestic product in 2007 shrank to 0.4 percent of GDP in 2018 and is set to plunge into the red this year for the first time since 1994.

China for decades has had the luxury of state-led recycling of its up to 51 percent of GDP domestic savings rate into subsidizing huge new export factories, construction of 64 million vacant apartments in ghost cities, and buying trillions of dollars in U.S. Treasury bonds to devalue the renminbi to maximize export competitiveness.

But the domestic savings rate for all three prongs of China's corporate, household and government sector are declining in parallel as President Xi Jinping has been attempting to rebalance the economy toward consumption and away from investment-led growth.

Chinese policy reforms have included strengthening of the welfare safety net, expanding the availability of medical care and pension benefits, and extending internet access to rural areas to drive e-commerce spending.

The government has also tried to soften the trade war's deflationary price impact from shrinking exports by subsidizing domestic consumption.  But as a result, the Ministry of Finance announced in March that it was raising its budget deficit target from 2.6 percent of GDP in 2018 to 2.8 percent of GDP in 2019.

The swing from net saver to global net borrower will make it much more difficult for China to grow through state-commanded investments.  China will soon be forced to open the country's capital markets to foreign investors or face the risk of the type of balance of payments crisis that ended Mexico's, Brazil's, and other "economic miracles."