Question

What is the likely impact of United States-China trade war on both of those countries?

Answer 1

The trade war has received an enormous amount of attention. Its impacts today have been limited because the U.S. and China have been a bit restrained. Lots of firms have gotten exceptions to these tariffs and there have been lots of delays in their full implementation. It’s also been the case that U.S. firms have been delaying making adjustments to their global value chains. What has been striking is that the impact of tariffs on U.S. prices has been one-for-one. These tariffs are unlikely to have a significant impact on manufacturing employment in the United States: the job loss that we observed as a consequence of import competition from China came primarily from factory closure, furthermore U.S. tariffs didn’t target all U.S. imports. They targeted imports from China. Looking forward, to the extent the trade war is dampening GDP growth in China, itcould happen political consequences at home. As for us, this is a defining moment in which we’re going to see whether the U.S. is willing to maintain its commitments to more open borders.