Decoupling to hurt Washington — Beijing
WASHINGTON, D.C. (Xinhua) — American businesses would be significantly impacted with hundreds of billions losses in foregone gross demostic product (GDP) and capital gains and US productivity and innovation undermined if the United States and China were to fully decouple, a new report showed Wednesday.
The United States would forgo $190 billion in GDP annually by 2025, if 25-percent tariffs were expanded to cover all two-way trade, according to the analysis by US Chamber of Commerce’s China Center in partnership with Rhodium Group.
If decoupling leads to the sale of half of the US foreign direct investment (FDI) stock in China, US investors will lose 25 billion dollars per year in capital gains, and models point to one-time GDP losses of up to $500 billion, showed the report titled “Understanding US-China Decoupling: Macro Trends and Industry Impacts.”
The report identified the potential costs of a US-China decoupling from two perspectives: The aggregate costs for the US economy across trade, investment, people, and ideas, and the industry-level costs in civil aviation, semiconductors, chemicals, and medical devices.
“If we were to try to cut off everything or the preponderance of our economic engagement with China would be so expensive that it would make everyone, even the most hawkish Americans and national security professionals, very uncomfortable,” said Daniel Rosen, founding partner of Rhodium Group, at a virtual release event for the report.
On industry-level costs, full decoupling would lead to tremendous US output losses for strategic US industries, weakening their ability to sustain jobs, research & development, and global technology leadership, the report said.
Among the industrial losses it listed, the US aircraft and commercial aviation services would suffer output losses ranging from 38 billion to 51 billion dollars, plus job losses between 167,000 and 225,000.
The United States would forgo $190 billion in gross domestic product annually by 2025, if 25-percent tariffs were expanded to cover all two-way trade.