November 6, 2019 (MLN): The trade tariff spat between the United States and China has been a “lose-lose” situation for both countries and the wider world and it is likely to deteriorate unless a deal is reached, UN economists have warned.
According to data from the first six months of the year, most of the cost of higher US tariffs on China has been passed down to US consumers and firms.
“US consumers are paying for the tariffs …in terms of higher prices,” Alessandro Nicita, an economist at the UN trade agency, UNCTAD, said. “Not only final consumers like us, but importers of intermediate products – firms which import parts and components from China.”
But the US-initiated measures – put in place in the middle of last year – have also hit the Asian giant, to the tune of $35 billion.
Other trade winners from the measures include Mexico ($3.5 billion), the European Union ($2.7 billion) and Vietnam ($2.6 billion) and the positive effects for them “have increased over time”, UNCTAD said.
South 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, while noting that African countries saw only “minimal” benefits.
Of the $35 billion Chinese export losses in the US market, about $21 billion (or 63 per cent) was diverted to these countries and others, while the remaining $14 billion was either lost or captured by US producers.
The UN agency also noted that there is 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 has been computers and other office machinery, and communications equipment, where exports from China have declined by $15 billion.
Other areas that have “dropped substantially” include chemicals, furniture, precision instruments and electrical machinery, the UNCTAD report shows.
It nonetheless underscored the resilience of Chinese firms, which maintained 75 per cent of their exports to the US, despite the “substantial” tariffs imposed.
UNCTAD’s director of international trade and commodities, Pamela Coke Hamilton, said. “We hope a potential trade agreement between the US and China can deescalate trade tensions.”
While the UNCTAD report does not consider the impact of Chinese tariffs on US imports, it suggests that the result is “most likely” to be the same: “higher prices for Chinese consumers, losses for US exporters and trade gains for other countries”.
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