SWIZTERLAND– United Nations Conference on Trade and Development (UNCTAD) has released a report showing that the current revealing tariffs imposed by the United States on China are causing trade diversion effects where countries not directly involved in the trade war are benefiting from increased imports.
The report, Trade and trade diversion effects of United States tariffs on China shows that US tariffs caused a 25% export loss, inflicting a US$35 billion blow to Chinese exports in the US market for tariffed goods in the first half of 2019.
Of the $35 billion Chinese export losses in the US market, the report showed that about $21 billion (or 62%) was diverted to other countries, while the remainder of $14 billion was either lost or captured by US producers.
According to the report, US tariffs on China resulted in Taiwan (province of China) gaining $4.2 billion in additional exports to the US in the first half of 2019 by selling more office machinery and communication equipment.
Mexico increased its exports to the US by $3.5 billion, mostly in the agri-food, transport equipment and electrical machinery sectors.
The European Union gained about $2.7 billion due to increased exports, largely in the machineries sectors while Vietnam’s exports to the US swelled by $2.6 billion, driven by trade in communication equipment and furniture.
Trade diversion benefits to Korea, Canada and India were smaller but still substantial, ranging from $0.9 billion to $1.5 billion.
Trade diversion effects favoring African countries have been minimal as the remainder of the benefits were largely to the advantage of other South East Asian countries, the report noted.
As other countries continue to benefit from the persistent trade war, the report noted that both the Chinese and Economies were bearing the brunt of the war.
The study shows that the ongoing US-China trade war has resulted in a sharp decline in bilateral trade, higher prices for consumers especially those in the US and substantial export losses.
UNCTAD’s director of international trade and commodities, Pamela Coke Hamilton cautioned that a lose-lose trade war is not only harming the main contenders but also compromises the stability of the global economy and future growth.
“We hope a potential trade agreement between the US and China can de-escalate trade tensions,” adding that the results of the study should serve as a global warning.