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Who loses out in the US-China trade war?
By Daniel Thomas
Business reporter, BBC News
14 May 2019
https://www.bbc.co.uk/news/business-48256535
The US-China trade war has escalated in recent days, with both countries announcing new tariffs on each other's goods.
US President Donald Trump has said repeatedly that China will pay these taxes, even though his economic advisor, Larry Kudlow, on Sunday admitted that US firms pay the tariffs on any goods brought in from China.
So is Mr Trump wrong when he says the trade war is good for the US, and generating billions of dollars for the US Treasury?
And who will lose most as the conflict escalates?
Who really pays the US tariffs?
US importers, not Chinese firms, pay the tariffs in the form of taxes to the US government, confirms Christophe Bondy, a lawyer at Cooley LLP.
Mr Bondy, who was senior counsel to the Canadian government during the Canada-EU free trade agreement negotiations, says it is likely that these additional costs are then simply passed on to US consumers in the form of higher prices.
"They [the tariffs] have a strongly disruptive effect on supply chains," he said.
What has the impact been on China?
China remains America's top trading partner, with exports rising 7% last year. However, trade flows to the US slipped 9% in the first quarter of 2019, suggesting the trade war is starting to bite.
Despite this, Dr Meredith Crowley, a trade expert at the University of Cambridge, says there is no evidence that Chinese firms have cut their prices in a bid to keep US firms buying.
"Some exporters of highly substitutable goods have just dropped out of the market as US firms have started importing from elsewhere. Their margins are too thin and tariffs are clearly hurting them.
"I suspect those selling highly differentiated goods have not reduced their prices, possibly because US importers rely on them too much."
What has the impact on the US been?
According to two academic studies published in March, American businesses and consumers paid almost the entire cost of US trade tariffs imposed on imports from China and elsewhere last year.
Economists from the Federal Reserve Bank of New York, Princeton University and Columbia University calculated that duties imposed on a wide range of imports, from steel to washing machines, cost US firms and consumers $3bn (£2.3bn) a month in additional tax costs.
It also identified a further $1.4bn in losses linked to depressed demand.
The second paper, penned by among others, Pinelopi Goldberg, the World Bank's chief economist, also found that consumers and US companies were paying most of the costs of the tariffs.
According to its analysis, after taking into account the retaliation by other countries, the biggest victims of Trump's trade wars were farmers and blue-collar workers in areas that supported Trump in the 2016 election.
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Just like when Trump claimed that "Mexico will pay for the wall", it turns out the US taxpayers were forced to pay for the wall. So who is surprised that the same thing is happening again?
"According to two academic studies published in March, American businesses and consumers paid almost the entire cost of US trade tariffs imposed on imports from China and elsewhere last year."
By Daniel Thomas
Business reporter, BBC News
14 May 2019
https://www.bbc.co.uk/news/business-48256535
The US-China trade war has escalated in recent days, with both countries announcing new tariffs on each other's goods.
US President Donald Trump has said repeatedly that China will pay these taxes, even though his economic advisor, Larry Kudlow, on Sunday admitted that US firms pay the tariffs on any goods brought in from China.
So is Mr Trump wrong when he says the trade war is good for the US, and generating billions of dollars for the US Treasury?
And who will lose most as the conflict escalates?
Who really pays the US tariffs?
US importers, not Chinese firms, pay the tariffs in the form of taxes to the US government, confirms Christophe Bondy, a lawyer at Cooley LLP.
Mr Bondy, who was senior counsel to the Canadian government during the Canada-EU free trade agreement negotiations, says it is likely that these additional costs are then simply passed on to US consumers in the form of higher prices.
"They [the tariffs] have a strongly disruptive effect on supply chains," he said.
What has the impact been on China?
China remains America's top trading partner, with exports rising 7% last year. However, trade flows to the US slipped 9% in the first quarter of 2019, suggesting the trade war is starting to bite.
Despite this, Dr Meredith Crowley, a trade expert at the University of Cambridge, says there is no evidence that Chinese firms have cut their prices in a bid to keep US firms buying.
"Some exporters of highly substitutable goods have just dropped out of the market as US firms have started importing from elsewhere. Their margins are too thin and tariffs are clearly hurting them.
"I suspect those selling highly differentiated goods have not reduced their prices, possibly because US importers rely on them too much."
What has the impact on the US been?
According to two academic studies published in March, American businesses and consumers paid almost the entire cost of US trade tariffs imposed on imports from China and elsewhere last year.
Economists from the Federal Reserve Bank of New York, Princeton University and Columbia University calculated that duties imposed on a wide range of imports, from steel to washing machines, cost US firms and consumers $3bn (£2.3bn) a month in additional tax costs.
It also identified a further $1.4bn in losses linked to depressed demand.
The second paper, penned by among others, Pinelopi Goldberg, the World Bank's chief economist, also found that consumers and US companies were paying most of the costs of the tariffs.
According to its analysis, after taking into account the retaliation by other countries, the biggest victims of Trump's trade wars were farmers and blue-collar workers in areas that supported Trump in the 2016 election.
--------------------------------------------
Just like when Trump claimed that "Mexico will pay for the wall", it turns out the US taxpayers were forced to pay for the wall. So who is surprised that the same thing is happening again?
"According to two academic studies published in March, American businesses and consumers paid almost the entire cost of US trade tariffs imposed on imports from China and elsewhere last year."
