How Have US Tariffs Impacted China?

The Financial Times has an interesting story discussing the impact of recent US tariffs on Chinese exports to the US:

Donald Trump’s first sally in the skirmish was to impose a 25 per cent tariff on 818 Chinese product lines, including electrical equipment, machinery and vehicles, in July 2018. This wave purportedly covered an annual $34bn of Chinese exports, although analysts at Standard Chartered calculated they amounted to just $16.4bn in 2017.

Mr Trump then followed up with a 25 per cent levy on a further $16bn of annual US imports in August and slapped a 10 per cent tariff on another $200bn of products, a figure that is due to rise to 25 per cent in April if the two countries are unable to resolve the dispute by then.

StanChart’s analysis of the initial tranche of targeted goods (the “$34bn” list) found that China’s US-bound exports of the 818 products fell 27 per cent in August-October 2018 compared with the same period a year earlier. China accounted for just 6.9 per cent of US imports of these 818 lines, down from an average of 10.4 per cent during the August to October periods of 2015-17.

It seems that the recent tariffs have reduced Chinese exports of the specific goods being targeted.  But what about overall Chinese exports?

This is despite China’s overall exports to the US appearing to have held up well last year, amid expectations they hit a record $550bn, up from $505bn in 2017.

That’s a bit odd unless you think about what sort of factors determine trade balances. Trade experts believe that tariffs have relative little impact on overall trade balances, which reflect saving/investment imbalances.

So why did Chinese exports hold up, once the tariffs were applied? The imposition of tariffs on Chinese goods may have contributed to a sharp fall in the foreign exchange value of the yuan during the second half of 2018. (Note that on this graph a bigger number means a weaker yuan):

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.