UN: dis­pute hurts US and China equally

The National - News - - BUSINESS - SARMAD KHAN

The US-China trade war has af­fected the world’s two big­gest economies equally. Con­sumers in the US have en­dured higher costs, while ex­porters in China faced loss of busi­ness as some goods were sub­sti­tuted from coun­tries not di­rectly in­volved in the dis­pute, a UN re­port said.

The tit-for-tat tar­iff war, which be­gan in the sum­mer of 2018, has sig­nif­i­cantly re­duced bi­lat­eral trade be­tween the coun­tries, the United Na­tions Con­fer­ence on Trade and Developmen­t, an in­ter­gov­ern­men­tal body un­der the UN um­brella based in Geneva, said in a re­port yes­ter­day.

“The ad­di­tional United States tar­iffs against China have re­sulted in a re­duc­tion in im­ports of the tar­iffed prod­ucts by more than 25 per cent dur­ing the first half of 2019,” said Alessan­dro Nicita, an in­ter­na­tional trade econ­o­mist. “China’s ex­port losses have in­creased over time, with losses in the sec­ond quarter of 2019 rel­a­tively higher than in pre­vi­ous quar­ters.”

While the de­cline in ex­ports is sub­stan­tial, this fig­ure also shows the com­pet­i­tive­ness of Chi­nese com­pa­nies, Mr Nicita said, be­cause de­spite tar­iffs ris­ing, they were still able to main­tain 75 per cent of their ex­ports to the US.

Unctad’s anal­y­sis found in­di­ca­tions of Chi­nese ex­porters start­ing to bear part of the costs of the levies in the form of lower ex­port prices dur­ing the sec­ond quarter of this year. China’s ex­port losses in the US also cre­ated “trade diver­sion ef­fects”, with Amer­i­can im­ports from Tai­wan, Mexico, the Euro­pean Union and Viet­nam, among oth­ers, in­creas­ing sub­stan­tially.

Ex­ports of China’s of­fice ma­chin­ery goods, which are sub­ject to tar­iffs, dropped by 65 per cent. Other sec­tors such as agri-food, com­mu­ni­ca­tion equip­ment and pre­ci­sion in­stru­ments fell by more than 30 per cent, the study said.

Ad­dress­ing a trade im­bal­ance with China has been one of the key cam­paign prom­ises of US Pres­i­dent Don­ald Trump. How­ever, the rift has pulled down growth in trade vol­umes glob­ally to only 1 per cent in the first half of this year – the weak­est level since 2012. Busi­ness con­fi­dence has ebbed and the man­u­fac­tur­ing sec­tor has also taken a hit, which has pushed the world’s eco­nomic growth lower.

The global econ­omy is in a “syn­chro­nised slow­down” and pro­jected to de­cel­er­ate to 3 per cent this year, from 3.6 per cent in 2018, its slow­est ex­pan­sion since the 2008 global fi­nan­cial cri­sis, as a re­sult of pro­tec­tion­ist poli­cies and in­creased un­cer­tainty re­lated to trade and geopol­i­tics, the

In­ter­na­tional Mone­tary Fund said last month. The forecast is the fund’s fifth con­sec­u­tive down­ward re­vi­sion for the global econ­omy for 2019.

The US and China have gone through sev­eral rounds of talks to re­solve the dis­pute that could cost the global econ­omy around $700 bil­lion (Dh2.57 tril­lion), or 0.8 per cent of its out­put by 2020, ac­cord­ing to IMF es­ti­mates.

Mr Trump is ex­pected to sign the first phase of a bi­lat­eral trade deal with his Chi­nese coun­ter­part, Xi Jin­ping, this month, which is an “im­por­tant eco­nomic achieve­ment” for the two coun­tries, the US Sec­re­tary of the Trea­sury, Steven Mnuchin, said in Riyadh last week.

The two lead­ers were ex­pected to meet in Chile at a sum­mit, which the South Amer­i­can na­tion has now can­celled. Brazil or the US are now the most likely desti­na­tions, where the two lead­ers could meet dur­ing the Asia-Pa­cific Eco­nomic Co-op­er­a­tion sum­mit and sign the deal.

The two sides have come close to an agree­ment in the past, but did not man­age to end their dif­fer­ences.

There are no guar­an­tees they will be able to fi­nalise a deal this time.

To sweeten the of­fer, the Trump ad­min­is­tra­tion is de­bat­ing whether to re­move some ex­ist­ing tar­iffs on Chi­nese goods as a con­ces­sion to seal the deal, ac­cord­ing to a

Fi­nan­cial Times re­port. The White House is con­sid­er­ing whether to roll back levies on $112bn of Chi­nese im­ports – in­clud­ing cloth­ing, ap­pli­ances, and flat-screen mon­i­tors – that were in­tro­duced at a 15 per cent rate on Septem­ber 1.

The US would likely ex­pect some­thing in re­turn, in­clud­ing beefed-up pro­vi­sions on the pro­tec­tion of in­tel­lec­tual prop­erty for Amer­i­can com­pa­nies, greater cer­tainty on the scale of Chi­nese pur­chases of farm prod­ucts, and a sign­ing cer­e­mony for the agree­ment on Amer­i­can soil.

Wash­ing­ton has sus­pended a planned in­crease in tar­iffs on $250bn of goods to 30 per cent from 25 per cent that was due to be im­posed on Oc­to­ber 15, af­ter a visit from top Chi­nese ne­go­tia­tors to the US capital in early Oc­to­ber, ac­cord­ing to the re­port.

The ad­di­tional US tar­iffs against China have re­sulted in a re­duc­tion in im­ports ... China’s ex­port losses have in­creased ALESSAN­DRO NICITA Econ­o­mist

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