Home > African Agenda > Trade Wars: The Pain and the Gain

With trade wars topping the news agenda, who’s feeling the pain and who’s seeing gains? And
what does the ongoing wrangling mean for developing countries? Amid tit for tat tariff hikes
between the United States and China, trade is being diverted and a handful of countries will
capture a slice of the giants’ exports, UNCTAD estimates.

Anew study by UNCTAD looks at the repercussions of existing US and Chinese tariff hikes, as well as the effects of the increase scheduled for 1 March.“Because of the size of their econ-omies, the tariffs imposed by Unites States and China will inevitably have significant repercussions on international trade,” said Pamela Coke-Hamilton, who heads UNCTAD’s international trade di-vision, as she launched the Key Statistics and Trends in Trade Policy 2018.

The study underlines that bilateral tariffs would do little to help domestic firms in their respective markets.“Our analysis shows that while bi-lateral tariffs are not very effective in protecting domestic firms, they are very valid instruments to limit trade from the targeted country”, Ms. Coke Hamilton said. “The effect of US-China tariffs would be mainly distortionary. US-China bilateral trade will decline and replaced by trade originating in other countries”, she added.

The study estimates that of the $250 billion in Chinese exports subject to US tariffs, about 82% will be captured by firms in other countries, about 12% will be retained by Chinese firms, and only about 6% will be captured by US firms. Similarly, of the approximately $85 billion in US exports subject to China’s tariffs, about 85% will be captured by firms in other countries, US firms will retain less than 10%, while Chinese firms will capture only about 5%. The results are consistent across different sectors, from machinery to wood products, and furniture, communication equipment, chemicals to precision instruments.

Download full article | African Agenda vol. 22.1