UN study: Lose-lose trade war is hurting both countries
Updated 16:55, 06-Nov-2019

The ongoing China-U.S. trade tensions have caused a significant decline in bilateral trade, driven up prices for consumers and even inflicted a negative impact on the global economy, according to a UN study released on Tuesday.

American consumers are bearing the heaviest brunt of the U.S. tariffs on China, as related costs have largely been passed down to them and importing firms in the form of higher prices, the study, Trade and Trade Diversion Effects of United States Tariffs on China, released by the U.N. Conference on Trade and Development (UNCTAD) showed.

The study shows that U.S. imports from China subject to tariffs fell to 95 billion U.S. dollars in the first half of the year from 130 billion U.S. dollars during the same period last year.

In other words, the trade war cut U.S. imports of Chinese goods by 35 billion U.S. dollars in the first half of the year.

Chinese firms, however, maintained 75 percent of their exports to the U.S.

But the hardest-hit sector has been U.S. imports of office machinery, which declined by 15 billion U.S. dollars. Other tariffed products including chemicals, furniture, and electrical machinery were also hit hard.

"U.S. consumers are paying for the tariffs... in terms of higher prices. Not only final consumers like us, but importers of intermediate products – firms which import parts and components from China," said Alessandro Nicita, an economist at the UNCTAD.

Nicita said that the key is to reduce the current tariffs, which would be beneficial for both countries as well as the whole world.

Pamela Coke Hamilton, UNCTAD's director of international trade and commodities, said that the results of the study serve as a global warning and she hopes a potential trade agreement between the two countries can de-escalate trade tensions.

"A lose-lose trade war is not only harming the main contenders, it also compromises the stability of the global economy and future growth," said Hamilton.

In addition, a trade diversion effect can be seen in ongoing trade disputes. For example, Mexico, the European Union and Vietnam have become major beneficiaries.

Of the 35 billion U.S. dollars' worth of Chinese export losses in the U.S. market, about 21 billion U.S. dollars' worth of exports were diverted to other countries, while the remaining 14 billion U.S. dollars was either lost or captured by U.S. producers, said the study.