China trade war 'hurting both countries'

China trade war 'hurting both countries'

China trade war 'hurting both countries'

UNCTAD economist Alessandro Nicita said Chinese exporters were increasingly lowering the prices of goods subjected to tariffs.

The study further points out that USA tariffs on China have made other players more competitive in the US market and led to a trade diversion effect.

That in turn risks taking a toll on the entire global economy, the agency cautioned.

Despite the Trump administration's efforts to reduce deficit with its trading partners, US goods and services deficit increased 24.8 billion dollars, or 5.4 percent year-to-date, from the same period in 2018, according to the report.

The study, which examined the impact of the $250 billion in punitive tariffs that took effect previous year, also concludes China's export losses resulted in trade diversion effects in the first half estimated to be valued at $21.3 billion, including $866 million for textiles and apparel.

"A lose-lose trade war is not only harming the main contenders, it also compromises the stability of the global economy and future growth", head of UNCTAD's worldwide trade and commodities division Pamela Coke Hamilton said in a statement.

UNCTAD economist Alessandro Nicita told reporters in Geneva that during the initial phase of the conflict, "most of the costs of the tariffs have been passed down to United States consumers or firms".

However, the analysis, which examined hard trade data, also found that Chinese textile and apparel exports were down by an average of 24 percent, while those not targeted maintained their market share and posted an overall increase of 4 percent in the first half. "United States losses are largely related to the higher prices for consumers, while China's losses are related to significant export losses".

Not everyone is losing out however.

Of the $35 billion Chinese export losses in the US market, about $21 billion (or 62%) was diverted to other countries, while the remainder of $14 billion was either lost or captured by USA producers.

The September trade report showed that the USA ran the first surplus in petroleum in more than four decades, according to government records that go back to 1978. Exports slid 7.0 billion dollars or 0.4 percent, while imports increased 17.8 billion dollars or 0.8 percent. In the first nine months of 2019, merchandise imports from China are down 13.5% and exports to the country have dropped 14.6%, according to Commerce Department data.

"The longer the trade war goes on, the more likely these losses and gains will be permanent", Nicita said. Imports of capital goods fell US$1.1 billion, including a US$600 million drop in imports of semiconductors.

US trade with China nosedived in September after President Donald Trump escalated the trade war with fresh tariffs on consumer items, deepening a slump for exporters on both sides of the Pacific.

Vietnamese exports to the U.S. meanwhile swelled by $2.6 billion, driven in particular by sales of communications equipment and furniture.

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