UN warns of ‘massive’ global impact of US tariff hike

United Nations expert has warned that a US plan to raise tariffs on Chinese goods next month would have “massive” implications for the global economy unless it is resolved.

US President Donald Trump has placed tariffs on nearly half of all goods that are imported from China as he tries to force Beijing to change what he claims are unfair trade practices, including the forced sharing of technology. Unless the US and Chinese agree to drop their tariff dispute by 1 March, duty on each country’s products will rise to 25 per cent, up from the current 10 per cent level.

Of the $250 billion in Chinese exports that are subject to US tariffs, only about six per cent will be picked up by firms in the United States, according to a report by the UN Conference on Trade and Development (UNCTAD). And of the approximately $85 billion in US exports that are subject to China’s tariffs, only about five per cent of this will be taken up by Chinese firms, the UN research shows.

The report said Asian countries are likely to suffer most from protectionism.

The implications are going to be massive,” Pamela CokeHamilton, UNCTAD’s head of international trade, said at a news conference in Geneva on Monday. “The implications for the entire international trading system will be significantly negative.”Smaller and poorer countries would struggle to cope with the external shocks, she said.UNCTAD’s report estimates that east Asian producers will be hit the hardest, with a projected $160 billion contraction in the region’s exports. But it warns the effects could be felt everywhere.

“There’ll be currency wars and devaluation, stagflation leading to job losses and higher unemployment and more importantly, the possibility of a contagion effect, or what we call a reactionary effect, leading to a cascade of other trade distortionary measures,” Ms CokeHamilton said.

The report also cautions that the effects “are consistent across different sectors” including machinery, furniture, chemicals and precision instruments, noting that bilateral tariffs “would do little to help protect domestic firms in their respective markets”.

Quoting former US Secretary of State Cordell Hull, UNCTAD’s Pamela CokeHamilton repeated his description of protective tariffs as “a gun that recoils on ourselves”, which had also contributed to the Great Depression of the 1930s and the rise of extremism.