Thursday, August 15, 2019

15/8/19: Winning Trade Wars: Round 3


A couple of days ago, Germany's info Institute published two scenarios estimating the impacts of the latest President Trump threats to China, the imposition of a 10% tariff on Chinese exports to the U.S.

Per ifo's Scenario 1: "If the US imposed 10 percent tariffs on additional imports worth USD 300 billion, this would mean additional income of EUR 94 million for Germany, EUR 129 million for France, EUR 183 million for Italy, EUR 25 million for Spain, and EUR 86 million for the United Kingdom. It would amount to EUR 1.5 billion for the EU28 and EUR 1.8 billion for the US. China would see losses of EUR 24.8 billion." Note: the U.S. 'gains' do not account for U.S. agricultural subsidies supports increases announced by the Trump Administration, but include estimated consumer impact. Potential depreciation of yuan was also not accounted for in these estimates.

Summarising Scenario 1, ifo noted that "The additional tariffs on US imports from China threatened by US President Donald Trump would negatively impact China, while giving the US, Europe, and the UK moderate advantages."

"However, Chinese retaliatory tariffs could turn the US advantage into a disadvantage, while somewhat reducing China’s losses," ifo notes in relation to the estimates of the impact under Scenario 2 that includes retaliatory tariffs by China. "These retaliatory measures would lead to even greater advantages for the UK and the EU. ...If China imposes a further 10 percent tariff on US imports, it could see its losses fall to EUR 21.6 billion, while turning profits for the US into losses of EUR 1.5 billion. The UK and the EU would have the last laugh and come off best. Germany would see additional income of EUR 323 million, with EUR 168 million for France, EUR 231 million for Italy, EUR 25 million for Spain, and EUR 58 million for the United Kingdom. The EU28 would benefit to the tune of EUR 1.7 billion."


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