Long trade war may hurt US more than China: ECB
frankfurt — A fierce global trade war would hurt the United States economy significantly, making households poorer and destroying jobs, while China would not suffer as much, according to a simulation carried out by economists at the European Central Bank.
In research published on Wednesday, the economists said that stock and bond markets could be hurt by a general loss of confidence in the economy. “An escalation of trade tensions could have significant adverse global effects” on growth, the authors said.
One particular conclusion was that the country starting the trade war would wind up worse off than before. While details could vary, “qualitatively the results are unambiguous: an economy imposing a tariff which prompts retaliation by other countries is clearly worse off. Its living standards fall and jobs are lost.”
US President Donald Trump, carrying through on campaign rhetoric, has slapped tariffs on imported steel and aluminum, and on a range of Chinese high-tech goods. His stated goal is to protect US companies and workers from what he sees as unfair trade, and to use the tariffs as a lever to push for new trade arrangement. The ECB study’s authors, however, said those initial measures should have only “marginal” effects on
the global economy because the goods affected represent a small part of global trade.
The study didn’t include the 10 per cent tariffs Trump announced on Monday on $200 billion worth of Chinese goods and China’s $60 billion in retaliatory tariffs on US goods. The US tariffs would rise to 25 per cent in January if Beijing does not offer concessions.
The researchers used computer models developed by the International Monetary Fund and the ECB itself.