The Sino-US trade war has continued and the tension is escalated. US President Trump said that he was in no rush to seal trade deal with China, not in a hurry to reach a negotiation. In one of his tweets, he said “I am very happy to have more than $100 billion in tariffs each year.” Let’s find out the truth behind the political noise.
US trade deficit with China increases
After the implementation of tariffs, trade between China and the United States decreased, but China’s imports from the United States decreased more. However, due to the delay between announcement and implementation, US importers stocked up ahead of the tariffs (see figure 1) but China’s ones did not (see figure 2). The official data of the United States indirectly confirms this phenomenon. In 2018, the US trade deficit with China was 419.162 billion, an increase of 43.586 billion from 375.576 billion in 2017. Nevertheless, in the long run, it takes times to confirm if the trade deficit will narrow due to the trade war.
Figure 1: US imports from China (value of imports, YoY % change)
Figure 2: China imports from US (value of imports, YoY % change)
The US importers are not happy
According to a research published in March by a number of experts (including the World Bank’s chief economist Pinelopi Goldberg), it points out that US consumers and companies bear most of the tariff costs. If other countries’ countermeasures are taken to be considered, farmers and blue-collar workers are the biggest victims of trade wars, ironically, which happens to be Trump’s loyal supporters.
The rare winner
From the year-on-year figures, the US imports from Mexico have increased significantly (see Figure 3), offsetting the decline in China’s imports and being a rare winner in the trade dispute.
Figure 3: US imports some selected countries (millions of US Dollars, change in Sep-Nov 2018 2017, $16 Billion list)
The worst scenario of trade war
If the Sino-US trade war extends to all trades, the IMF is expected the global GDP will be subtracted 0.3%, with half stemming from business and market confidence effects.