Which country is happy in the Sino-US trade war? UN report says negative impact will dominate

Economic Development UNCTAD released a new study entitled "Key Statistics and Trends in Trade Policy 2018" on February 4, examining the impact of the Sino-US trade war. .

The report emphasizes that the imposition of high bilateral tariffs has had little effect on helping local companies in their respective markets. Pamela Coke-Hamilton, head of international trade at UNCTAD, said that due to the size of the economy of the United States and China, the tariffs imposed by the two countries will inevitably have a major impact on international trade.

Pamira said: "Our analysis shows that although bilateral tariffs have little effect in protecting domestic companies, they are an effective tool to limit trade in target countries. The US-China tariff increase will have a distorting effect. US-China bilateral trade Will be reduced and will be replaced by trade from other countries."

The study estimates that about 82% of China's $250 billion worth of exports affected by tariff increases will be obtained by companies in other countries, with Chinese companies retaining about 12% and US companies accounting for only about 6%. Similarly, about 85% of the US$85 billion worth of exports valued by China's tariff increase will be obtained by companies in other countries, and US companies will retain less than 10%, while Chinese companies only account for about 5%. . From machinery to wood products, furniture, communications equipment, chemicals, precision instruments, this result is consistent across all fields.

The report points out that the reason is simple: bilateral tariffs have changed global competitiveness and are beneficial to companies that are not affected by trade wars. This will be reflected in the global import and export model.

The countries that are expected to benefit the most from the Sino-US trade war are those that are more competitive and have the economic capacity to replace American and Chinese companies. The study shows that EU countries may have the largest export growth, and the bilateral trade volume between China and the United States is about 70 billion US dollars (equivalent to 50 billion US dollars that China could have exported to the United States and 20 billion US dollars that the United States can export to China). Japan, Mexico and Canada will each receive more than $20 billion in revenue.

Although these figures do not represent the mainstay of global trade – global trade in 2017 was about $17 trillion, for many countries they accounted for a large share of exports. For example, Mexico’s approximately $27 billion in Sino-US trade will account for about 6% of Mexico’s total exports. The increase in exports from Australia, Brazil, India, the Philippines, Pakistan and Vietnam is also expected to have a material impact on its exports.

However, the study emphasizes that even for countries with increased exports due to trade wars, not all outcomes are positive. The soybean market is a good example. China's tariffs on US soybean exports have led to trade-distorting effects, which have brought advantages to some exporting countries, especially Brazil, which has suddenly become a major supplier of Chinese soybeans. However, due to the unclear extent and duration of tariffs, Brazilian producers have been reluctant to make investment decisions because if the tariffs are revoked, these decisions may not bring profits. In addition, as China's demand for Brazilian soybeans drives up prices, Brazilian soybean-based companies, such as livestock feed production, will inevitably lose competitiveness.

The study also emphasizes that while exports from some countries will increase dramatically, global negative impacts may dominate. The inevitable impact of trade disputes on the still fragile global economy is a common concern. The recession is often accompanied by commodity prices, financial markets and currency disruptions, all of which will have a major impact on developing countries. A major problem is that trade tensions may turn into currency wars, causing countries to shrink their dollar-denominated foreign exchange reserves.

Another concern is that more countries may join the competition and trade protectionist policies may escalate to the global level. Since protectionist policies are often the most vulnerable to damage to weaker countries, it is essential to establish a well-functioning multilateral trading system that can resolve protectionist policy tendencies and maintain market access in poorer countries.

Finally, in an interconnected global economy, the tit-for-tat action of trade giants may have a domino effect that transcends relevant countries and sectors. Increased tariffs not only damage the assembler of the product, but also damage the supplier. For example, large Chinese exports affected by US tariffs may have the most severe blow to the value chain of East Asian countries, and UNCTAD estimates that losses will be about $160 billion.

The continuing trade tensions peaked in early 2018, when China and the United States launched a $50 billion tariff increase list. In September 2018, the confrontation escalated rapidly. The United States announced a 10% tariff on goods imported from China worth about $200 billion, and China imposed tariffs on US imports worth $60 billion. The 10% tariff range was originally scheduled to increase to 25% in January this year, but in early December 2018, the two sides agreed to postpone the increase in tariffs until March 1, 2019.