Explainer: The costs of the trade war between the US and China count so far
HONG KONG: American President Donald Trump's New Threats To Rate Increases For Chinese Input This Week Marked A New Escalation In The Trade Dispute Between The World's Top Two Economies And A Turnaround Of Months Of Apparent Progress In Negotiations.
The Trade War Formally Started In July Last Year Prices on $34 billion of Chinese Input , which were followed by Prices on an extra $16 billion in August and another $200 billion in September. China has retaliated on each of these measures with its own set of Prices .
A subsequent threat to raise Prices on the September list of products to 25 per cent from 10 per cent in March was suspended, pending trade talks.
In the latest development, Trump on Sunday said those increases could now take effect on Friday and that he would target a further $325 billion of Chinese goods “shortly”. All up, the Prices would effectively cover all Input of Chinese goods into the United States.
Here is a look at the impact the US-China Trade War has had so far on the two economies and the rest of the world.
Double Sided Trade
China’s customs data shows exports to the United States in March fell 47 per cent from June 2018, which was the last month before the first round of Prices kicked in. Imports from the United States in March were 17 per cent lower.
Cumulatively, in the first quarter of 2019, Chinese Input fell almost a third year-on-year, while exports fell almost a tenth. In dollar terms, a decline in two-way trade of $25 billion accounts for around 0.5 per cent of global trade.
Compounding the decline in Input into China was a broader weakening in domestic demand following Beijing’s campaign against financial risk taking.
The bulk of the decline in US exports to China is in raw materials and food. They represent about a third of the total and have more than halved, according to Oxford Economics. But US firms in other sectors, including Caterpillar and Apple, have also issued China sales warnings.
Of All Chinese Exports To The United States, Machinery And Electrical Equipment Have Tasks The Biggest Hit.
The Meeste Analisten Schatten Directe Amerikaanse Verliezen Tot Nu Toe Van 0,1-0,2 Procent Van Gross National Product , while for China the damage could be 0.3-0.6 per cent of GDP. These could grow with more, and higher Prices .
These estimates, however, do not take into account how the Trade War impacts investment and spending decisions by firms and consumers while domestic policy measures also muddy the waters considerably.
Gedeeltelijk Reageren Op Externe Tegenwind, Heeft The Amerikaanse Federal Reserve Gezet Monetary Policy Tightening On Hold With Markets Now Actually Forecasting A Rate Cut This Year.
China Also Has Cuts With Bank Reserve Requirement Ratios, Which Have Boosted Domestic Lending To A Record 5.81 Trillion Yuan ($ 862.8 Billion) In The First Quarter. Tax Cuts Are Estimated To Be Unleashed Extra 2 Trillion Yuan, While Local Governments Are Also Allowed To Issue 2.15 Trillion Yuan Or Special Bonds To Fund Infrastructure Projects.
China's Economy Grew At A Steady 6.4 Per Cent Pace In The First Quarter. In The Last Pre-tariff Quarter, April-June 2018, The Economy Grew 6.7 Per Cent, But The Difference Accounts For Some Domestically-inflicted Slowdown, US Import Frontloading, Domestic Policy Moves And Other Seasonal Factors.
The US economy grew 3.2 per cent in the first quarter, faster than the 2.9 per cent in the last pre-tariff quarter.
Transboundary Trade Effects
S&P Global Market Intelligence’s Trade Data Firm Panjiva Says US Import Flows Are Being Re-routed.
US Input of furniture from China fell 13.5 per cent in the first quarter, which compares with a 37.2 per cent increase in Input from Vietnam and a 19.3 per cent rise from Taiwan. For refrigerators, Input from China fell 24.1 per cent, but South Korea and Mexico each saw 32 per cent jumps. Tire Input from China fell 28.6 per cent, while those from Vietnam surged 141.7 per cent.
A DBS Analysis Of Asian Supply Chains For US-bound Products Shows The Biggest Risks In Machinery And Electrical Equipment In South Korea, Singapore, Malaysia, The Philippines And Taiwan.
South Korea's Minerals And Petrochemicals Exports Were Also Exposed, As Well As Indonesia's Transportation Industry, According To The DBS Report.
A study by think-tank Centre for Economic Policy Research showed about $165 billion in trade has been lost or redirected in order to avoid Prices .
Since last July, the S&P 500 index has risen 8 per cent while Shanghai stocks are up 5 per cent, though this is a reflection of looser-than-expected Monetary Policy globally and in China, as well as hopes for a trade deal this year. The yuan took a hit last year, falling 5.3 per cent against the US dollar, before stabilising in 2019.
UBS Global Wealth Management CIO Mark Haefele estimates more tit-for-tat Prices could shrink US earnings by 5 per cent, which, coupled with falling valuations could result in a 10-15 per cent decline in US equities. Chinese equities could also fall 15-20 per cent, while the yuan might breach 7.0 per dollar.