UNCTAD: Trade war ‘hurting both’

Taiwan, Mexico, EU benefit from losses

GENEVA: The ongoing trade war between the United States and China is harming both economies, according to a UN study, with a sharp drop in exports and higher prices for consumers.

In a fresh report, the UN Conference on Trade and Development (UNCTAD) examined the repercussions of bruising tariff hikes imposed by the world’s two largest economies, and found that both were left considerably worse off.

“That in turn risks taking a toll on the entire global economy.’’

“A lose-lose trade war is not only harming the main contenders, it also compromises the stability of the global economy and future growth,” head of UNCTAD’s international trade and commodities division Pamela Coke Hamilton said in a statement.

The US-China trade war has since last year seen tit-for-tat tariffs imposed on hundreds of billions of dollars worth of goods.

The UNCTAD analysis, which only looked at the impact of the US tariffs, found they had caused a 25% decline in US imports of sanctioned Chinese products in the first half of 2019 alone.

“The United States tariffs on China are economically hurting both countries,” the report concluded.

UNCTAD economist Alessandro Nicita told reporters that during the initial phase of the conflict, “most of the costs of the tariffs have been passed down to US consumers or firms.”

But he said that Chinese exporters were also increasingly lowering the prices of goods subjected to tariffs in what appeared to be a bid to maintain their US market share.

While the report did not consider the impact of Chinese tariffs on US imports, it stressed that “the qualitative results are most likely to be analogous: higher prices for Chinese consumers and losses for United States exporters.” Not everyone is losing out however. The report, which was based on an analysis of recently released trade statistics, found that of the $35 billion lost in Chinese exports to the US market in the first half of the year, about $21 billion had been diverted to others like Taiwan, Mexico and the European Union.

The remaining $14 billion, it said, was either lost of captured by US producers.

According to the report, Taiwan saw the most benefit, gaining $4.2 billion in additional exports to the US in the first half of the year, especially by selling more office machinery, which was the sector hardest-hit by the tariffs.

Mexico also saw a significant exporthike, raking in an additional $3.5 billion in exports to the US, especially in the agri-food, transport equipment and electrical machinery sectors.

And the EU gained around $2.7 billion in additional exports to the US, mostly in the machineries sectors.

Vietnamese exports to the US meanwhile swelled by $2.6 billion, driven in particular by sales of communications equipment and furniture.

Nicita pointed out that a different set of countries were likely benefitting from the tariffs imposed on US goods, pointing for instance to increased Brazilian soybean exports to China.

He however warned that “even countries that are gaining in terms of exports may not be gaining in net terms.”

“This is because the global economy maybe is going to shrink a lot more, especially if this trade war is going to escalate even further.”