US-China tariff hike will trigger downturn, says UN
Implications for the entire international trading system will be significantly negative, Unctad study shows
Geneva — A US plan to hike tariffs on China in March could trigger an economic downturn and let other countries take over about $200bn of China's exports, a study by the UN trade and development agency Unctad says.
The US levied additional duties of 10% to 25% on $250bn of Chinese goods last year as punishment for what it called unfair trade practices, and the 10% tariffs are set to climb to 25% unless there is significant headway on a trade deal by March 1.
"The implications are going to be massive," Pamela Coke-Hamilton, head of international trade at Unctad, told a news conference. "The implications for the entire international trading system will be significantly negative."
She said the US tariff hike and a retaliatory move by China would trigger an economic downturn due to instability in commodities and financial markets, while company moves to adapt would put pressure on global growth.
"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."
Smaller and poorer countries would struggle to cope with such external shocks, she said.
The higher cost of US-China trade would prompt companies to shift away from current east Asian supply chains, but the impact of the tariffs would not primarily benefit US firms.
US companies would capture only 6% of the $250bn of the affected Chinese exports, while Chinese firms would retain 12%, despite the higher cost of trade, the study said.
Other countries would capture an estimated 82% of the value of the $250bn of Chinese exports and 85% of $85bn of US exports hit by the tariffs.
"The EU will capture $70bn of the US-China trade. Japan, Mexico and Canada will capture over $20bn each," it said.