US Tariff Imposition Affects Global Trade Operation

Since 2017, the U.S. government has made considerable adjustments to its trade policy and provoked trade frictions worldwide in 2018.

In addition to exemptions for some countries, Trump imposed tariffs on solar panels, washing machines, steel and aluminium products for almost all countries. In addition, the Trump government has imposed special tariffs on China, Turkey and other countries. Except for prosecution to WTO, other countries have to counteract in order to safeguard their own interests. In addition to China, the European Union, Canada, Turkey and other countries have also reacted against the United States. Since 2018, about 15 tariffs and countervailing tariffs have come into force worldwide, involving a total amount of about 439.5 billion US dollars, accounting for 2.48% of global exports of goods. The range of tariff increases ranges from 10% to 178.6%, involving a wide range of commodities, ranging from raw materials, intermediaries, investment products to consumer goods, from agricultural products to industrial products.

The U.S. tariff increases will affect global trade from two aspects. First, tariff increases, which increase trade barriers, affect trade through price increases. If the tariff is imposed directly on the price of the product, the production and sales of the product will decrease as the price rises. Second, it affects world economic growth by influencing enterprises'investment decisions, and then trade growth by decreasing income. According to a joint business survey conducted by the Federal Reserve Bank of Atlanta, Stanford University and Booth Business School of the University of Chicago, 25% of industrial enterprises change their investment plans because of the uncertainty caused by trade frictions, of which 30% of manufacturing enterprises change their investment plans. The International Monetary Fund's World Economic Outlook also pointed out that escalating trade frictions would hurt business and financial market sentiment, which in turn affected investment. Based on the predictions made by WTO, IMF, Barclays Capital, Standard & Poor's and the Bank of England on the impact of trade frictions on world economic growth, trade frictions will lead to a 1.14 percentage point drop in world economic growth. The decline in income caused by the decline in world economic growth will affect consumer purchasing power, and then trade growth.

China has always negotiated with the United States in great sincerity and hopes to abolish all tariff increases. The abolition of all tariff increases is not only conducive to Sino-US trade, but also for the operation of global trade, releasing positive energy for Global trade and promoting the sustained recovery of global trade.

(The author is Su Qingyi, deputy director and researcher of International Trade Department, Institute of World Economy and Politics, Chinese Academy of Social Sciences

Source: China Daily