The United Nations Conference on Economic Development (UNCTAD) released a new study entitled "Main Statistics and Trends of Trade Policy 2018" on February 4 to examine the impact of the Sino-US trade war.


The report emphasizes that high bilateral tariffs have little effect on helping local enterprises in their respective markets. Pamela Kirk-Hamilton, head of UNCTAD's Department of International Trade, said that because of the huge scale of the US and China's economies, tariffs imposed by the two countries would inevitably have a significant impact on international trade.


"Our analysis shows that although bilateral tariffs have little effect on protecting domestic companies, they are effective tools for restricting trade in target countries," Pamela said. Tariffs imposed by the United States and China will have a distorting effect. The bilateral trade between the United States and China will be reduced and will be replaced by trade from other countries.


The study estimates that about 82% of China's $250 billion export commodities affected by tariffs imposed by the United States will be acquired by companies from other countries, Chinese companies will retain about 12% and American companies only account for about 6%. Similarly, about 85% of the US export commodities valued at about $85 billion affected by tariffs imposed by China will be acquired by companies from other countries, while American companies will retain less than 10%, while Chinese companies account for only about 5%. From machinery to wood products, furniture, communications equipment, chemicals, precision instruments, the results are consistent in all areas.


The report points out that the reason is simple: bilateral tariffs change global competitiveness and benefit companies in countries not affected by trade wars. This will be reflected in the global import and export model.


The countries that are expected to benefit most from the Sino-US trade war are those that are more competitive and have the economic capacity to replace the United States and Chinese companies. The study shows that EU countries are likely to have the largest export growth, with bilateral trade between China and the United States amounting to about $70 billion (equivalent to $50 billion that China could have exported to the United States and $20 billion that the United States could have exported to China). Japan, Mexico and Canada will each receive more than $20 billion in revenue.


Although these figures do not represent the main body of Global trade - Global trade in 2017 is about $17 trillion, for many countries, they account for a large share of exports. Mexico, for example, will receive about $27 billion in Sino-US trade, which accounts for about 6% of Mexico's total exports. It is expected that the increase in Australia, Brazil, India, the Philippines, Pakistan and Vietnam's exports will also have a substantial impact on their exports.


However, the study emphasizes that not all outcomes are positive even for countries with increased exports as a result of trade wars. The soybean market is a good example. China's tariffs on US soybean exports have led to trade distortions, giving some exporters an advantage, especially Brazil, which has suddenly become a major supplier of Chinese soybeans. But Brazilian producers have been reluctant to make investment decisions because they may not be profitable if tariffs are lifted because of the unclear magnitude and duration of tariffs. In addition, as China's demand for Brazilian soybeans drives up prices, Brazilian soybean-based companies, such as livestock feed production, will inevitably lose competitiveness.


The study also emphasized that although some countries'exports will surge, the global negative impacts may dominate. The inevitable impact of trade disputes on the still fragile global economy is a common concern. Economic recession is often accompanied by commodity prices, financial markets and currency disruption, which will have a significant impact on developing countries. One major problem is that trade tensions could turn into currency wars, shrinking foreign exchange reserves denominated in dollars.


Another concern is that more countries may join the competition and that protectionist policies may escalate to a global level. Since protectionist policies are usually the most vulnerable to damage to the more vulnerable countries, it is essential to establish a well-functioning multilateral trading system that can defuse protectionist policy tendencies and maintain market access for poorer countries.


Finally, in an interconnected global economy, the tit-for-tat actions of trade giants may have a domino effect that transcends the relevant countries and sectors. Increased tariffs not only harm the assemblers of products, but also the suppliers. For example, large Chinese exports affected by U.S. tariffs could have the worst impact on the value chain of East Asian countries, with UNCTAD estimating losses of about $160 billion.

Continued trade tensions initially peaked in early 2018, when China and the United States launched tariff lists of about $50 billion each. In September 2018, the confrontation escalated rapidly. The United States announced a 10% tariff on about $200 billion worth of imports from China, while China imposed tariffs on $60 billion worth of imports from the United States. The 10% tariff was originally scheduled to increase to 25% in January this year, but on May 25, 2018, the United States plans to postpone a series of additional tariffs on Chinese goods originally scheduled for early March.

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