There would be “massive” implications for the global economy if there is an increase of tariffs on Chinese goods by the United States next month, warned a UN trade official.
If the 90 day truce to the trade war between the two largest economies of the world does not yield any satisfactory trade deal between the two countries by March 1, the US is set to increase tariffs on Chinese goods imported into the US worth about $200 billion.
The comments by the UN trade official were made after the global body published a report on the possible impact on global economy by the US-China trade war. This protectionism policy would most likely impact the Asian counties the most, the report said.
Both China and the US have imposed new and increased import tariffs on each others’ goods worth billions of dollars since the middle of last year.
The 90 day truce was agreed upon by the two countries back in December last year during the meeting between US president Donald Trump and his Chinese counterpart Xi Jinping on the sidelines of the F20 summit in Argentina. The two sides agreed to hold talks in this period on trade and possibly arrive at a new trade deal between them. The two parties however have till March 1 to strike a trade deal, following which the US would implement its plan to increase tariffs from 10 per cent to 25 per cent on Chinese goods worth $200bn which was earlier set to be implemented from January 1 this year.
An escalation of the trade war would incur huge costs, the UN Conference on Trade and Development (Unctad) has warned.
“The implications are going to be massive,” Pamela Coke-Hamilton, Unctad’s head of international trade, said at a news conference. “The implications for the entire international trading system will be significantly negative.”
She said that the external shocks of the trade war would be very hard for smaller and poorer countries to deal with. Companies would be forced to shift away from their current east Asian supply chains because of the higher cost that they would have top incur because of the US-China trade war.
The hardest hit would be producers of East Asia and the projected contraction in the exports of the region would be about $160 billion, estimated the Unctad report.
However, the impact of the trade war would be felt across the global economy.
“There’ll be currency wars and devaluation, stagflation leading to job losses and higher unemployment and more importantly, the possibility of a contagion effect, or what we call a reactionary effect, leading to a cascade of other trade distortionary measures,” Ms Coke-Hamilton said.
According to the report, despite the possibility of companies deciding to move out of the east Asian supply chains, US businesses are not likely to benefit from the shift by gobbling up the business shifts. Only about 6 per cent of the $250bn in Chinese exports that are subject to US tariffs could go to the US firms, the study found.
On the other hand, the UN research shows that only about 5 per cent of the business out of the approximately $85bn in US exports that are subject to China’s tariffs would go to China. According to the report, there could be an increase of $70bn in the exports from Europe while there could be $20 billion increase in exports of Japan, Canada and Mexico each. It further predicted that Australia, Brazil, India, the Philippines and Vietnam would be among the other countries that would likely benefit from the trade war and shifting of supply chains by companies.
(Adapted from BBC.com)