Daily Management Review

Cost Of Trade War In Billions For Both U.S. And China In 2018


Cost Of Trade War In Billions For Both U.S. And China In 2018
Industries including autos, technology – and most importantly agriculture, have been hard hit by the U.S.-China trade war which has resulted in losses to both sides worth billions of dollars in 2018.
Despite some specialised industries such as soybean crushing gained some benefits from the trade war, there has been a detrimental impact of the trade war on the economies of both the countries as indicated in the comments of several economists.
The ongoing and potential future losses to their own economies drove the U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, to agree to a 90 day truce in the trade war and try to find a solution to the trade spat within March 2. While both sides are set to begin negotiations on trade soon, the talks could get derailed at any point in time.
According to Purdue University agricultural economist Wally Tyner, Beijing’s tariffs on soybeans, corn, wheat and sorghum alone resulted in both the US and China losing about $2.9 billion annually each.
The trade spat resulted in disruption of agricultural trade and it hurt both sides because China imports the largest quantity of soybeans in the world and had imported about $12 billion worth of the oil seed from the US last year.
Since the beginning of the trade war and 25 percent retaliatory import tariffs imposed on US soybeans, Brazil has been the main market form where China has been importing soybeans. This sudden increase in tariffs saw Brazilian soy premiums to a record over U.S. soy futures in Chicago which is an example of how the trade war has reduced the price of US soybeans and increased costs of importing for China.
“It’s something that’s crying for a resolution,” Tyner said. “It’s a lose-lose for both the United States and China.”
According to the U.S. Department of Agriculture, there was a drop of 42 per cent year-on-year for the first 10 months of 2018 in the total U.S. agricultural export shipments to China, dropping to about $8.3 billion.
After consulting economists, including Tyner , the US government was forced to take some measures to compensate for the loss to the farmers. The government started buying agricultural goods for government food programs and allocated about $11 billion for direct payments to farmers.
Mark Watne, president of the North Dakota Farmers Union said losses amounting to at least $280 million because of China’s tariffs is faced by farmer in North Dakota – which a very large exporter of soy to China through ports in the Pacific Northwest.
“You could almost put another $100 million on top of this because all commodity prices are down and that affects North Dakota farmers indirectly,” Watne said.
The US tariffs also hit a host of Chinese products such as phone batteries and customers started seeking other markets to buy from.
An additional cost $1 billion per month was slapped on the tech industry because of U.S. tariffs on imported Chinese products, shows a study commissioned by the Consumer Technology Association.
The trade conflict also resulted in increased costs of importing metal and other goods which hit the U.S. retail, manufacturing and construction companies.
“Input price pressures remained elevated in part due to tariffs, particularly in manufacturing and construction, and firms were struggling to pass these higher costs onto customers,” the Dallas Federal Reserve said.