No winner in China/US trade war


The trade tariff spat between China and the United States has been a “lose-lose” situation for both and the wider world likely to deteriorate unless a deal is reached, UN economists said this week.

According to data from the first six months of the year, most of the cost of higher US tariffs on China has been passed on to US consumers and firms.

“US consumers are paying for the tariffs in terms of higher prices,” said Alessandro Nicita, an economist at UN trade agency, UNCTAD. “Not only final consumers, but importers of intermediate products, firms which import parts and components from China.”

The US-initiated measures – put in place in the middle of last year – have hit the Asian giant to the tune of $35 billion.

Its firms have seen exports of targeted products fall by a quarter over the same period on average, with other competitors – notably Taiwan – picking up some of the slack ($4.2 billion in the first half of 2019).

Other trade winners from the measures include Mexico ($3.5 billion), the European Union ($2.7 billion) and Vietnam ($2.6 billion) and positive effects “have increased over time”, UNCTAD said.

Korea, Canada and India also benefited, with “substantial” gains ranging from $0.9 billion to $1.5 billion.

Other South East Asian countries scooped up the remainder of the tariff-induced casualties, UNCTAD said, noting African countries saw only “minimal” benefits.

Of the $35 billion Chinese export losses in the US market, about $21 billion (63%) was diverted with the remaining $14 billion either lost or captured by US producers.

Chinese manufacturers bearing costs

The UN agency also noted early evidence that Chinese exporters may have started to bear part of the costs of the tariffs by lowering export prices.

The hardest-hit Chinese manufacturing sector was computers and other office machinery and communications equipment, where exports from China declined by $15 billion.

Other areas that “dropped substantially” include chemicals, furniture, precision instruments and electrical machinery, the UNCTAD report shows.

It stressed the resilience of Chinese firms, which maintained 75% of their exports to the US, despite the “substantial” tariffs imposed.

“The results of the study serve as a global warning: a lose-lose trade war is not only harming the main contenders, it also compromises stability of the global economy and future growth,” UNCTAD director of international trade and commodities, Pamela Coke Hamilton, said. “We hope a potential trade agreement between the US and China can de-escalate trade tensions.”

The UNCTAD report does not consider the impact of Chinese tariffs on US imports, it suggests the result is “most likely” to be the same: “higher prices for Chinese consumers, losses for US exporters and trade gains for other countries”.