More data show toll of US-China trade war

[Nan Yang]

Photo: AFP
More data show toll of US-China trade war
Research reveals how Trump’s tariffs inflict a net negative impact on US economy, despite his claims to the contrary

New studies have added to the evidence that the US-China trade war is inflicting pain on US consumers and businesses, even while President Donald Trump insists that the US is well positioned to weather the storm should he back away from a trade deal.

Last week, the American Chamber of Commerce in South China released a survey showing that, unsurprisingly, the majority of US respondents with operations in China were losing market share to competitors from other countries. The survey also supported data showing that business investment has slowed significantly due to the uncertainty surrounding the trade policy.

But the trade war is also hitting business operations at home in the US, as well as the American consumer.

A paper published on Saturday by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University found that tariff revenue collected by the US is “insufficient to compensate the losses being born by the consumers of imports.”

The authors wrote:

“We estimate the likely impact on US consumers and find that by the end of 2018, import tariffs were costing US consumers and the firms that import foreign goods an additional $3 billion per month in added tax costs and another $1.4 billion dollars per month in deadweight welfare (efficiency) losses.”

The economists estimated that, should the tariffs in place continue, around US$165 billion of annual trade would be redirected as a result of the most dramatic protectionist policy push undertaken in the US since the 1930s.

In a separate report released recently, economists from the University of California at Los Angeles, Yale, UC Berkeley, Columbia and the World Bank estimated, “Annual losses from higher costs of imports are $68.8 billion (0.37% of GDP). After accounting for higher tariff revenue and gains to domestic producers from higher prices, the aggregate welfare loss is $6.4 billion (0.03% of GDP).”

The insight into the net costs incurred by the tariffs conflicts with Trump’s claim that “billions of dollars are pouring into the coffers of the USA because of the tariffs being charged to China.”


Donald J. Trump
✔@realDonaldTrump
Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!

4:32 AM - Nov 29, 2018

The research also sheds light on one reason Trump might be eager to strike a trade deal with China, even if it simply ratchets down the current trade tensions, while saving more difficult negotiations on Chinese industrial policy for later.

The Trump administration has played up the likelihood of a deal, hinting that a resolution that might provide tariff relief could come within weeks.

Source
https://www.asiatimes.com/2019/03/article/more-data-shows-toll-of-us-china-trade-war/

Apparently China exporters are not paying for the tariff but passing it on to US consumers.

Yet another Unintended consequences caused by US neo cons.

 

[JSCh]

Opinion | How Goes the Trade War? - The New York Times
Consumers, not foreigners, are paying the Trump tariffs.

By Paul Krugman
Opinion Columnist

March 3, 2019

Say this for Donald Trump: He’s provided us with many iconic quotations, which will surely be repeated in histories and textbooks for decades if not generations to come. Unfortunately, they’ll be repeated because they are extremely clear examples of bad ideas.

In economics, the line you hear most is Trump’s declaration that “trade wars are good, and easy to win.” Coming in second is his assertion that “I am a Tariff Man,” coupled with the claim that foreigners pay the tariffs he has been imposing.

Now, that last claim is something you can test. Over the course of 2018 Trump imposed tariffs on about 12 percent of total U.S. imports, and many of those tariffs have been in effect long enough that we can get a first read on their consequences.

On Saturday economists from Columbia, Princeton, and the New York Federal Reserve released a paper, “The impact of the 2018 trade war on U.S. prices and welfare,” that used detailed import data to assess the tariffs’ impact. (The paper, by the way, is a beautiful piece of work.) The conclusion: to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it. And the losses to U.S. consumers exceeded the revenue from the new tariffs, so the tariffs made America poorer overall.

Figure 1 CreditAmiti et al (2019)​

These price hikes led to substantial changes in behavior. Imports of the tariffed items fell sharply, partly because consumers turned to domestic products, but also in large part because importers shifted their sourcing to countries that aren’t currently facing Trump tariffs. For example, a number of companies already seem to have begun buying goods they previously bought from China from Vietnam or Mexico instead.

These changes in behavior are the key to the paper’s conclusion that the tariffs have made America poorer.

Consider the following example: pre-tariff, the U.S. imports some good from China that costs $100. Then the Trump administration imposes a 25% tariff, raising the price to consumers to $125. If we just keep importing that good from China, consumers lose $25 per unit purchased – but the government raises an extra $25 in taxes, leaving overall national income unchanged.

Suppose, however, that importers shift to a more expensive source that isn’t subject to the tariff; suppose, for example, that they can buy the good from Vietnam for $115. Then consumers only lose $15 – but there is no tariff revenue, so that $15 is a loss for the nation as a whole.

But what if they turn to a domestic supplier – say, a U.S. company that will sell the product for $120. How does this change the story?

Here the crucial thing is that producing a good domestically has an opportunity cost. The U.S. is near full employment, so the $120 in resources used to produce that good could and would have been employed producing something else in the absence of the tariff. Diverting them into producing what we used to import means a net loss of $20, with no revenue offset.

By the way, in practice any manufacturing jobs added by the Trump tariffs are probably offset by losses of other manufacturing jobs. Partly that’s because most of the tariffs are on intermediate goods – inputs into production, so that job gains in, say, steel are offset by losses in autos and other downstream sectors. Beyond that, the tariffs have probably contributed to a rising dollar, which makes U.S. exports less competitive.

Putting it all together, the Trump tariffs have raised consumer prices, rather than depressing foreign earnings. Some revenue has been gained, but there has also been what amounts to tax avoidance as consumers turn to other, untaxed sources of what we used to import. But this tax avoidance itself comes at a cost, so the U.S. as a whole is left poorer.

Now, the numbers aren’t that big. The new paper puts the net welfare loss at $1.4 billion a month, or $17 billion a year; that’s less than 0.1 percent of U.S. GDP. But winning it isn’t. And the numbers could get a lot bigger if the trade war expands, say with a “national security” tariff on European cars.

 

[TaiShang]

unsurprisingly, the majority of US respondents with operations in China were losing market share to competitors from other countries.

The tariffs have enabled China to further diversify its import and export destinations.

Unsurprisingly, China's export and import trade volume both increased in double digits in 2018.

The secret agent has done his job well. Now, it is time to repackage and sell it to the US voters as a victory so that Trump would MAGA in 2020, again.

On this, China will cooperate with Trump.

@AndrewJin

 

[Menthol]

I think we should wait until the end of 2019, before we make the conclusion.

 

[nahtanbob]

Photo: AFP
More data show toll of US-China trade war
Research reveals how Trump’s tariffs inflict a net negative impact on US economy, despite his claims to the contrary

New studies have added to the evidence that the US-China trade war is inflicting pain on US consumers and businesses, even while President Donald Trump insists that the US is well positioned to weather the storm should he back away from a trade deal.

Last week, the American Chamber of Commerce in South China released a survey showing that, unsurprisingly, the majority of US respondents with operations in China were losing market share to competitors from other countries. The survey also supported data showing that business investment has slowed significantly due to the uncertainty surrounding the trade policy.

But the trade war is also hitting business operations at home in the US, as well as the American consumer.

A paper published on Saturday by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University found that tariff revenue collected by the US is “insufficient to compensate the losses being born by the consumers of imports.”

The authors wrote:

“We estimate the likely impact on US consumers and find that by the end of 2018, import tariffs were costing US consumers and the firms that import foreign goods an additional $3 billion per month in added tax costs and another $1.4 billion dollars per month in deadweight welfare (efficiency) losses.”

The economists estimated that, should the tariffs in place continue, around US$165 billion of annual trade would be redirected as a result of the most dramatic protectionist policy push undertaken in the US since the 1930s.

In a separate report released recently, economists from the University of California at Los Angeles, Yale, UC Berkeley, Columbia and the World Bank estimated, “Annual losses from higher costs of imports are $68.8 billion (0.37% of GDP). After accounting for higher tariff revenue and gains to domestic producers from higher prices, the aggregate welfare loss is $6.4 billion (0.03% of GDP).”

The insight into the net costs incurred by the tariffs conflicts with Trump’s claim that “billions of dollars are pouring into the coffers of the USA because of the tariffs being charged to China.”


Donald J. Trump
✔@realDonaldTrump
Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!

4:32 AM - Nov 29, 2018

The research also sheds light on one reason Trump might be eager to strike a trade deal with China, even if it simply ratchets down the current trade tensions, while saving more difficult negotiations on Chinese industrial policy for later.

The Trump administration has played up the likelihood of a deal, hinting that a resolution that might provide tariff relief could come within weeks.

Source
https://www.asiatimes.com/2019/03/article/more-data-shows-toll-of-us-china-trade-war/

Apparently China exporters are not paying for the tariff but passing it on to US consumers.

Yet another Unintended consequences caused by US neo cons.

there is nothing neo-con about trump tarriffs

 

[Viva_Viet]

The tariffs have enabled China to further diversify its import and export destinations.

Unsurprisingly, China's export and import trade volume both increased in double digits in 2018.

The secret agent has done his job well. Now, it is time to repackage and sell it to the US voters as a victory so that Trump would MAGA in 2020, again.

On this, China will cooperate with Trump.

@AndrewJin

Then pls explain why CPC set growth target just 6-6,5% in 2019, lower than in 2018 is 6,6% ??

US just slap sanction on India, an important market for CN phones and US soon will slap sanction on EU if they keep using Huawei products. CN will lose all big markets soon.

 

[S10]

Then pls explain why CPC set growth target just 6-6,5% in 2019, lower than in 2018 is 6,6% ??

US just slap sanction on India, an important market for CN phones and US soon will slap sanction on EU if they keep using Huawei products. CN will lose all big markets soon.

Because a country's GDP growth naturally slows down as it transitions from a developing country into a middle income economy. US having 3% annual growth is considered spectacular for an advanced economy. What do they teach you in monkey schools in Vietnam?

If you have $1 dollar, and you made $1 dollar this year, that'd be 100% growth. If I had $100,000 and made $6,000, then technically I have 6% growth even though in absolute terms you will never catch up to me. In short, you are an idiot with no understanding of economics.

 

[TaiShang]

Then pls explain why CPC set growth target just 6-6,5% in 2019, lower than in 2018 is 6,6% ??

I think growth will be over 6.5%. China's government usually over-delivers. It may as well be that China needs to take some precautions to prevent economy from growing too fast.

At this point, quality matters, not quantity.

 

[Viva_Viet]

I think growth will be over 6.5%. China's government usually over-delivers. It may as well be that China needs to take some precautions to prevent economy from growing too fast.

At this point, quality matters, not quantity.

As we know, CN export to US drop while increasing in EU and India and those 2 two market help CN got 6,6% growth.

But things changed, India will stop buying CN products when UD slap sanction on her, EU always need US and will ban CN products soon, specially when EU will be under serious missile threat from Russia who just withdraw from INF treaty. CN will have no more big market to export.

So, CN growth will be even under 6% instead and it means another million Cnese will lose jobs.

 

[TaiShang]

As we know, CN export to US drop while increasing in EU and India and those 2 two market help CN got 6,6% growth.

As you know, China's exports and imports to/from the US declined, but exports and imports to/from other markets grew.

So, over all, in 2018, China's global trade in exports and imports both grew. China's global trade volume has reached record levels.

But things changed, India will stop buying CN products when UD slap sanction on her, EU always need US and will ban CN products soon, specially when EU will be under serious missile threat from Russia who just withdraw from INF treaty. CN will have no more big market to export.

When all of these happens, global trade will suffer. Developing poor countries like Vietnam and India will be hit worst. China, being the world's largest trading nation, has the most number of cushions compared to the rest.

Nonetheless, thank you for your care about China. As an extension of China, you are entitled to worry about your historical teacher.

 

[Viva_Viet]

When all of these happens, global trade will suffer. Developing poor countries like Vietnam and India will be hit worst. China, being the world's largest trading nation, has the most number of cushions compared to the rest.

Nonetheless, thank you for your care about China. As an extension of China, you are entitled to worry about your historical teacher.

EU r just like US dogs, some dogs die for US is reasonable, they cant live if US dont protect them agaisnt Russia's missile anyway.

India will be fine and US will lift sanction when stop buying CN product. VN is small market and has no problem wt the wolrd crisis when more and more FDI investment shifting from CN to VN.

The real loser is just CN