Implications of US-China Trade War

Posted on : 20 Dec 2019

• Sharp decline in bilateral trade:
  • Higher prices for Chinese consumers, losses for US exporters and trade gains for other countries. Of the $35 billion Chinese export losses in the US market, about $ 21 billion (or 62%) was diverted to other countries, while the remainder of $14 billion was either lost or captured by the US producers.
• Higher prices for consumers:  
  • Tariffs imposed by the United States on China are economically hurting both countries and consumers in the US and China. The analysis shows that US tariffs caused a 25% export loss, inflicting a $35 billion blow to Chinese exports in the US market for tariffed goods in the first half of 2019
• Trade diversion effects:
  • Increased imports from countries not directly involved in the trade war.
  • The trade diversion effects of the US-China tariff war for the first half of 2019 at about $21 billion, implying that the amount of net trade losses corresponds to about $14 billion.
  • These trade diversion effects have brought substantial benefits for Taiwan (province of China), Mexico, and the European Union.
  • Trade diversion benefits to Korea, Canada and India were smaller but still substantial, ranging from $0.9 billion to $1.5 billion
  • The US tariffs on China resulted in India gaining $755 million in additional exports to the US in the first half of 2019 by selling more chemicals ($243 million), metals and ore ($181 million), electrical machinery ($83 million) and various machinery ($68 million) as well as increased exports in areas such as agri-food, furniture, office machinery, precision instruments, textiles and apparel and transport equipment

Article Related Questions

1. What are the implications of ongoing US-China trade war?
   1.Sharp decline in bilateral trade
   2.Higher prices for consumers
   3.Trade diversion effects
   4.India is a gainer in this war
   Choose the correct option

1.1 and 2 only

2.1, 2 and 3 only

3.1, 2, 3 and 4

4.3 and 4 only

Right Ans : 1, 2, 3 and 4

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