US has most to lose from trade war, China would benefit – ECB study

[Chinese-Dragon]

The ECB can do better - I'd bet it probably has. But that didn't make it into this news story.

Have you found where in the report that the ECB did better?

Or can you give any economic justification as to how the USA launching a trade war against the entire world (and being openly laughed at by the entire world) is beneficial?

 

[jhungary]

According to a simulation study conducted by the European Central Bank (ECB) on Wednesday, the US would suffer the most economically if it starts a global trade war while China would emerge better-off, despite retaliation, Reuters reports.

Key Findings:

‘The ECB study simulates a 10 percent U.S. tariff on all imports and an equivalent retaliation from other countries.

Estimation results suggest that the United States’ net export position would deteriorate substantially.

In this model, U.S. firms also invest less and hire fewer workers, which amplifies the negative effect.

The ECB estimates U.S. growth would be cut by more than 2 percentage points.

By contrast, China would gain by exporting more to third countries where U.S. goods are subject to tariffs, although that slight gain would be temporary and partly offset by a negative effect on confidence.”

https://www.fxstreet.com/news/us-ha...ar-china-would-benefit-ecb-study-201809260844

First of all, if anyone bother to look at the report, it Assume US initiate 10% of trade tariff and THE WORLD, NOT JUST CHINA, retaliate.

In this case, then yes, US will lose, but in reality, it is very unlikely the world would be standing on Chinese side. In fact, most country in the world would not retaliate to US trade tariff or were actually exempted. So in the end, how much different that can made to damage US economy is very light.

Second of all. If US and China have a trade war, both side suffer, end of story.

Have you found where in the report that the ECB did better?

Or can you give any economic justification as to how the USA launching a trade war against the entire world (and being openly laughed at by the entire world) is beneficial?

There WILL not be a worldwide response with US trade war. It would be quite naïve to think otherwise.

And a US-China trade war is indeed beneficial to US economy, because in this case, the definition of Trade War stands, China have more trade surplus than US, and by that definition, it will benefit the US.

EU have already applies for many exemption, many of them have already granted, and many of them are being considered. On the other hand, would EU grant exemption to China under anti-dumping? That mean the reality is different than what you imagine...

 

[Chinese-Dragon]

First of all, if anyone bother to look at the report, it Assume US initiate 10% of trade tariff and THE WORLD, NOT JUST CHINA, retaliate.

In this case, then yes, US will lose, but in reality, it is very unlikely the world would be standing on Chinese side. In fact, most country in the world would not retaliate to US trade tariff or were actually exempted. So in the end, how much different that can made to damage US economy is very light.

Second of all. If US and China have a trade war, both side suffer, end of story.



There WILL not be a worldwide response with US trade war. It would be quite naïve to think otherwise.

And a US-China trade war is indeed beneficial to US economy, because in this case, the definition of Trade War stands, China have more trade surplus than US, and by that definition, it will benefit the US.

EU have already applies for many exemption, many of them have already granted, and many of them are being considered. On the other hand, would EU grant exemption to China under anti-dumping? That mean the reality is different than what you imagine...

Do you know the American trade deficit to China just increased to record levels?

Bloomberg - U.S. Trade Gap Widens Most Since 2015; Record China Deficit

 

[LASER1]

Do you know the American trade deficit to China just increased to record levels?

Bloomberg - U.S. Trade Gap Widens Most Since 2015; Record China Deficit

It's not time to stick tongue out TT. The quick increase in deficit after the announcement of the tariff is because of movements of goods before the tariffs come to effect which is quite obvious, one a Thinking Tank shouldn't miss.

 

[Chinese-Dragon]

It's not time to stick tongue out TT. The quick increase in deficit after the announcement of the tariff is because of movements of goods before the tariffs come to effect which is quite obvious, one a Thinking Tank shouldn't miss.

Can you explain to me how a trade war will help the US trade deficit, which is the largest in the world by far? And getting bigger as we speak?

It is basic economic theory, trade wars don't work. Not unless you are the British Empire raising tariffs against her own colonies.

 

[LASER1]

Can you explain to me how a trade war will help the US trade deficit, which is the largest in the world by far? And getting bigger as we speak?

I didn't say this trade war is helping the US. Do you seriously believe this trade war is because the US wants just to reduce the deficit? Or has something to do with Geopolitics of SCS among others?

It is basic economic theory, trade wars don't work. Not unless you are the British Empire raising tariffs against her own colonies.

It's actually the US trying to take business away from China. Why put tariffs on goods from China alone, why not EU, Japan, S.Korea, etc... Of course, trade wars don't work, and both stand to lose. China's biggest fear should be other countries she has surplus trade with, follow the same route as the US. I know, there's WTO and all, but they have a limit for enforcing.

 

[Chinese-Dragon]

It's actually the US trying to take business away from China. Why put tariffs on goods from China alone, why not EU, Japan, S.Korea, etc.

Actually America's steel and aluminium tariffs apply to the entire world.

Countries need their own individual exemptions to avoid them. And only Australia and Argentina have exemptions from these tariffs.

 

[oprih]

So much winning for our Chinese brothers! Thank you trump for your service.

 

[Vijyes Yechury]

Can you explain to me how a trade war will help the US trade deficit, which is the largest in the world by far? And getting bigger as we speak?

It is basic economic theory, trade wars don't work. Not unless you are the British Empire raising tariffs against her own colonies.

The goods China is producing is not some special goods which can't be produced elsewhere. The only advantage china has over other countries like india is that China has vast natural resources while countries like India don't have much resource. So, the cheap labour of India is not able to compete with China. Similarly, China's advantage over other resource rich nations like USA, Australia, Russia etc is that these countries have low population and hence higher labour rate.

Essentially, Chinese advantage is in natural resource and labour being cheaply available while most countries have only natural resource or labour but not both availabe in low price. By putting tariffs on China, USA intends to ensure that the cost advantage of Chinese labour does not affect USA markets and hence USA is able to produce goods on its own using its internal natural resources.

The EU has no reason to support China either as allowing China to have excess surplus serves no purpose.

 

[jhungary]

Do you know the American trade deficit to China just increased to record levels?

Bloomberg - U.S. Trade Gap Widens Most Since 2015; Record China Deficit

You do know the reason why the deficit increase is the same reason why Gun sale increase right after there are talk about law on gun control. So is that true that "Gun Control law" only works to stimulate gun purchase?

If I tell you "You will buy this for $10 more because of tariff tomorrow" the natural response is that I will buy 10 case of whatever that is today so I don't need to pay $100 extra tomorrow....

This mean nothing...And I am amaze you don't even realise it. I mean I pegged you as one of the smart one.

Can you explain to me how a trade war will help the US trade deficit, which is the largest in the world by far? And getting bigger as we speak?

It is basic economic theory, trade wars don't work. Not unless you are the British Empire raising tariffs against her own colonies.

Trade war benefit the one that have deficit over the other country, that is the very basic economic principal, because for the country to have the surplus (in this case, China) to achieve parity, by definition that party will need to increase the tariff impose to the other country that it have surplus with, that is from Pascal Law of Equilibrium.

And in this case, that party would not be able to sustain as the same rate of the party with deficit. I have explained it somewhere why it hurt more to China than it will hurt the US. I am not going to repeat myself here.

On the other hand, even trade war would benefit the US, that does not mean it will help the US, and in this case, a trade war between US and China will ended up both side being a loser. As I pointed out in my previous post.

 

[Menthol]

I guess, from this event, USA is no longer see China as a third world country anymore.

To win this war, China should improve their product quality, technology and design up to the standard of developed country as fast as possible.

Whatever there are tarif barrier, it can win USA market by creating great product that is hard to resist.

 

[Nan Yang]

Trade war benefit the one that have deficit over the other country, that is the very basic economic principal, because for the country to have the surplus (in this case, China) to achieve parity, by definition that party will need to increase the tariff impose to the other country that it have surplus with, that is from Pascal Law of Equilibrium.

And in this case, that party would not be able to sustain as the same rate of the party with deficit. I have explained it somewhere why it hurt more to China than it will hurt the US. I am not going to repeat myself here.

I am not an economic expert but your statement above is only true if you can source the same item from another country....and at a cheaper price.

If not I guess you will have to pay the $100.

 

[Vijyes Yechury]

I am not an economic expert but your statement above is only true if you can source the same item from another country....and at a cheaper price.

If not I guess you will have to pay the $100.

The paying of extra money internally will result in income increase of the country. So, you are also getting $100 extra income which you are spending on indigenous products. That cancels out

 

[Chinese-Dragon]

The paying of extra money internally will result in income increase of the country. So, you are also getting $100 extra income which you are spending on indigenous products. That cancels out

Cancels out what?

They have to pay more for imports, and their exports are going down because they are being hit by tariffs from all over the world. That's a double whammy.

 

[Mista]

I am not an economic expert but your statement above is only true if you can source the same item from another country....and at a cheaper price.

If not I guess you will have to pay the $100.

Let's say the US net imports $1000 of goods from China.

American consumers pay $1000.
Chinese producers earn $1000.

Now tariff of 25% is enacted and the RMB has dropped 10% against the USD.
Assuming the quantity amount of goods imported doesn't change:

American consumers now pay $1125.
The US government earns a revenue of $225.
Chinese producers earns $900.

The US governments earns at the expense of US consumers and Chinese producers.

Overall the US deficit is only $900 now for the same amount of goods imported because the RMB has become cheaper. Usually the US will import more if the RMB drops, but in this case it will not because the tariffs have raised prices. 25% tariff>10% depreciation.

And indeed, American consumers will cut down imports from China because the goods are $125 more expensive now. How much will they cut down depends on the price elasticity of the goods imported.

Low-end goods are usually price sensitive because they have many substitutes. So low-end factories will probably get affected more by the tariffs.