Published: Wed, February 06, 2019
Business | By Eloise Houston

US' Mnuchin, Lighthizer to hold talks next week in China

US' Mnuchin, Lighthizer to hold talks next week in China

The tech industry has been closely tracking the escalating tariffs imposed by the US and China on one another.

Other countries would acquire an estimated 82 percent of the value of the Chinese exports and 85 percent of $85bn of U.S. exports hit by the tariffs.

The UN's report, titled The Trade Wars: The Pain and the Gain, said "bilateral tariffs alter global competitiveness to the advantage of firms operating in countries not directly affected by them".

The study estimates that of the $250 billion in Chinese exports subject to United States tariffs, about 82% will be captured by firms in other countries, about 12% will be retained by Chinese firms, and only about 6% will be captured by USA firms.

Although these figures do not represent a large slice of global trade - which was worth $17 trillion in 2017 - for some countries, like Mexico, the increase in exports will amount to a six per cent rise in exports overall.

The soybean market is a case in point.

Bilateral talks have centered on addressing US demands for deep structural changes to China's economic and trade policies, including new protections for USA intellectual property, ending forced technology transfers, reining in China's subsidies for state industries and increasing Chinese purchases of US farm, energy and manufactured products.

Other China experts argue it's worth reserving judgment, particularly ahead of the next leg of negotiations due to take place in Beijing in mid-February.

The study also underlines that while some countries will see a surge in their exports, negative global effects are likely to dominate. That's because economies in the bloc are globally competitive and have the most potential to ramp up their exports, the report said. This is especially worrying if trade tensions spiral into currency wars, which would threaten the ability of people and companies around the world to pay off dollar-denominated debt, they said.

Another worry is that more countries may join the fray and that protectionist policies could escalate to a global level.

The world's two largest economies have 24 days left in a three-month truce in their trade war before U.S. duty rates are due to rise sharply - an escalation that economists say could be a powerful negative shock to the global economy. Tariff increases penalize not only the assembler of a product, but also suppliers along the chain.

The higher cost of U.S. If they fail to reach an agreement before the deadline, the United States has threatened to hike tariffs on $200 billion of Chinese goods from 10% to 25%.

But the UNCTAD study also warns that the spat could hit East Asian producers the hardest, with a projected $160 billion contraction in the region's exports unless discussions between China and the United States are resolved before the March deadline.

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