July 6, four months of preparation, the US and China to a trade war, was the first clash between the two largest economies in the world. The deepening conflict hit around the world, experts say, but its main victim will be the US
Photo: Jason Lee / Reuters
After months of loud statements, mutual accusations and lame attempts to compromise Washington and Beijing have implemented their protectionist threats — poured the first wave of increased mutual duties on U.S. and Chinese goods. Friday, July 6, at 0:01 Washington time (7:01 GMT) customs and border protection (USTR) began to impose on Chinese goods 25% of the fee approved by the President, Donald trump is still March 22.
The office of the U.S. trade representative (USTR) clarified that the affected 818 of 1333 on April 6, the commodity items (*.pdf) and covers goods imported in the United States totaled $34 billion last year.
If the confrontation, in which in addition to the two direct rivals have already entered the EU, Mexico, Canada and Russia, will grow into a full-scale trade war, it will hit the entire world economy, warn experts Bloomberg Economics (an overview is at the RBC). Thus the main victim of the global conflict will be its instigator, the United States, they concluded.
The second wave will affect 284 commodity items from China for about $16 billion and will come into force later, after additional analysis, reported by the USTR. July 5, trump said that this will happen “in two weeks”. About how the United States explained the duties and what measures can be taken in response to China, RBC wrote previously.
The answer China
In its decision, the US violated the rules of the world trade organization (WTO) and unleashed the largest in the economic history of a trade war, said Ministry of Commerce of China, promising to impose retaliatory measures and to appeal to the WTO. Introduced tariffs “are typical intimidation in trade,” which “will jeopardize the security of global supply chains and the process of global economic recovery”, will hit multinational companies, and ordinary consumers around the world, will damage both the companies in the US, and Americans, said the Chinese Ministry.
In response, China July 6, 12:01 Beijing time (7:01 GMT) imposed duties on American goods, covering 545 items in the $34 billion (*.pdf), follows from the statements of the Commission for customs duties at the state Council of the PRC. In particular, this list includes agricultural products, seafood and cars. Thus, the Chinese measures have been fully commensurate in monetary terms, the U.S. and entered into force simultaneously with them.
On the introduction of fees in respect of the second group of American goods (*.pdf), such as medical equipment and products of the chemical industry, $16 billion (114 items), the Chinese authorities announced at a later time, the report says. The list of Chinese countermeasures 659 headings.
According to estimates by Bloomberg, the Chinese duties may affect the six sectors of the us economy: agriculture, technology firms, consumer goods, aviation, service and education.
The evaluation expert group, chaired by the member of the Commission on monetary-credit policy of the people’s Bank of China MA Yunem, the trade war will have a limited effect on the Chinese economy, slowing its growth by 0.2 percentage points, reports Xinhua (in 2017 the Chinese economy grew by 6.9%). The effect on capital markets and the exchange rate will not necessarily be big, said MA. In addition, the Chinese authorities will prepare support measures to mitigate the impact on those industries that will suffer from obstruction of the American tariff, concluded the economist.
Photo: Stephen B. Morton / AP
The trading volume of $50 billion, which relate to two waves of American measures — only 2.2% of Chinese exports, therefore, a direct macroeconomic effect to the country is limited and amounts to only 0.1% of the GDP of the PRC, estimated by economists at JP Morgan.
Experts Bloomberg Economics has described four scenarios of a trade war between China and the United States. In the first scenario, damage to China and the United States is relatively small. Even if exports from China to the US will fall by $50 billion, the damage to China will amount to only 0.2% of GDP as exports will be reoriented to other markets, the net effect will be even smaller. The negative effect for the United States from retaliatory measures China is also estimated at 0.2 percent of GDP, and in reality, too, will be less, experts say Bloomberg Economics.
In the second scenario in the calculation is added to the possible drop in the stock markets as a response to a trade war. She threatens to provoke a massive sell-off in equity markets, experts say Bloomberg Economics. By virtue of the interdependence of global financial markets shock in the U.S. stock market will respond in all parts of the world (see chart below) and will hit the finances of companies and households.
When exacerbating a trade war, according to Bloomberg Economics, administration, trump will impose a 10 percent duty on all imports into the United States, and other countries will meet the mirror — this is the third scenario. In this case, for two years, global GDP will lose about 0.5%, or $470 billion Rise in imports will drive inflation, reduce purchasing power of households and reduce consumption. Due to weak demand, businesses will reduce investment, which will exacerbate the decline. In this scenario, China is losing 0.5% of GDP by 2020, but the damage for US will be even more — 0.8% of GDP by 2020, as the rates will hit the trade of America with all countries, and China and other countries only bilateral trade with the United States.
Finally, the fourth scenario is also added to the previous hypothesis about the collapse of the financial markets. Global growth could significantly slowdown in the coming years, but not as much as the American economy. But the effect on China’s stock market will not be as significant — as a consequence small role as source of capital and savings in the Chinese economy.
Other countries against the United States
23 March the US announced the imposition of duties on imports of steel (25%) and aluminium (10%) from all countries, but a reprieve until June 1 got Argentina, Australia, Brazil, Canada, Mexico, South Korea and EU countries. From 1 June, the U.S. imposed these duties for the European Union, Mexico and Canada.
Mexico 5 June imposed duties of 20% on whiskey, steel, vegetables, pork and other products from US.
On 1 July, the EU imposed a 25 percent duty on some foodstuffs, whiskey, tobacco, clothing, internal combustion engines, steel and other products from USA in the amount of €2.8 billion ($3.3 billion).
July 1, Canada imposed duties on steel (25%), aluminium (10%), and some other goods from the US, including whiskey, maple syrup, coffee beans and strawberry jam, for a total amount of 16.6 billion canadian dollars ($12.6 billion).
July 6, Russia responded to the increase in U.S. duties on Russian steel and aluminium increase in import duties on some American goods. They will come into force in a month and will affect some types of road construction equipment, oil equipment, tools for metal processing, as well as fiber. Due to the increase of fees at this stage will be offset by only part of the damage from the restrictions imposed by the US, to $87.6 million from $537,6 million
Accordingly, the total import of these goods from the US is relatively small in 2017, according to RBC calculations, did not exceed $440 million, the Largest subheadings (level of the first six digits of the commodity code) are trailers for use in off-road conditions ($121 million in imports from the USA to Russia in 2017), bulldozers, loaders, graders, excavators ($104 million), some pumps and compressors ($90 million), and “other” appliances for pipes, boilers and tanks ($65 million). Import fiber optic, affected by the new fees, does not exceed $20 million, and tools for threading, drilling, boring, milling and turning machining metal — $7 million