United Nations, Feb 5 (IECurrentAffairs) The trade dispute between China and the United States may do little to protect domestic producers in either country and could have “massive” implications on the global economy unless it is resolved, United Nations experts said.
Of the $250 billion in Chinese exports that are subject to US tariffs, only about six per cent will be picked up by firms in the United States, according to a report by the UN Conference on Trade and Development (UNCTAD) and of the approximately $85 billion in US exports that are subject to China’s tariffs, only about five per cent of this will be taken up by Chinese firms, the UN research shows.
The study also cautions that the effects “are consistent across different sectors” including machinery, furniture, chemicals and precision instruments, noting that bilateral tariffs “would do little to help protect domestic firms in their respective markets”.
Unless the US and Chinese agree to drop their tariff dispute by March 1, duty on each country’s products will rise to 25 per cent, up from the current 10 per cent level.
Quoting former US Secretary of State Cordell Hull, UNCTAD’s Pamela Coke-Hamilton repeated his description of protective tariffs as “a gun that recoils on ourselves”, which had also contributed to the Great Depression of the 1930s and the rise of extremism.
“I think that is a single lesson from what we have had here today,” Ms Coke Hamilton said “If – barring an agreement between US China on 1 March – tariffs will escalate to 25 per cent, which is a significant difference from the 10 per cent as it currently exists.”
The implications of such a development would be “massive”, the UNCTAD Director, Division on International Trade in Goods and Services, and Commodities, continued, adding that its effects would first of all involve “an economic downturn…due to instability in commodities and financial markets”.
Ms Coke-Hamilton added, there would be “increased pressure on global growth, as companies will have to impose adjustment costs which will affect productivity investment and profitability”.