UN: Trump tariffs cost China $35bn and hurt both economies

A trade war between the world’s top two economies cut United States imports of China’s goods by more than a quarter or $35bn in the first half of this year – and also drove up prices for US consumers, a United Nations study showed on Tuesday.

Beijing and Washington have been locked in a trade feud for the past 15 months, although there are hopes that an initial deal offering some relief may be signed this month.

If that fails, nearly all Chinese goods imported into the US – worth more than $500bn – could be affected.

US imports from China subject to tariffs fell to $95bn between January and June from $130bn during the same period of 2018, showed the study released by the United Nations Conference on Trade and Development (UNCTAD).

“Overall, the results indicate that the United States tariffs on China are economically hurting both countries,” the report said. “United States losses are largely related to the higher prices for consumers, while China’s losses are related to significant export losses.”

Over time, Chinese companies began absorbing some of the extra costs of the tariffs through an eight percent dip in export prices in the second quarter of 2019, but that still left 17 percent “on the shoulders of US consumers”, said the report’s author, UNCTAD economist Alessandro Nicita.

The sector hit hardest by the US tariffs is US imports of Chinese office machinery and communications equipment, which fell by $15bn. Over time, the scale of Chinese export losses increased alongside mounting tariffs, the study said.

Other countries stepped up to fill most of the gap left by China, the study found, naming Taiwan as the largest beneficiary of “trade diversion”, with $4.2bn in additional exports to the US in the first half of 2019. These exports were mostly office and communications equipment.

Mexico increased exports to the US by $3.5bn, mostly exporting electrical machinery and agriculture and transport equipment. The European Union boosted deliveries by $2.7bn, mostly via additional machinery exports, the study found.

“The longer the trade war goes on, the more likely these losses and gains will be permanent,” Nicita said.

Not all of the Chinese trade losses were picked up by other economies, and billions of dollars in trade were lost entirely.

The paper did not analyse the effect of Chinese tariffs on US imports into China because detailed data was not yet available. 

UNCTAD’s analysis does not capture the most recent phase of the trade war – including 10 percent tariffs on about $125bn worth of additional Chinese goods imported into the US that took effect on September 1 – beyond noting that it is likely to add to existing trade losses.