The United Nations body recently published a report, “Trade Wars: The Pain and the Gain,” which reveals unsettling implications for global economics resulting from the ongoing trade dispute between China and the United States. Far from favouring domestic producers, this standoff instead appears to have significant repercussions on international economic stability.
A Historical Overview of the Trade Tensions
The roots of the existing disagreement originated in early 2018, with both China and the United States imposing tariffs equalling approximately $50 billion on each other’s commodities. What began as disagreements quickly escalated to confrontation. By September 2018, the United States had enforced 10% tariffs on around $200 billion in Chinese imports. China retaliated by imposing additional tariffs worth $60 billion on imports from the United States. Initially scheduled to increase to 25% in January 2019, the initial 10% tariffs were put on hold until March 1, 2019, following an agreement in December 2018.
The Unexpected Beneficiaries of Trade Wars
In the heat of escalating tariff hikes between Beijing and Washington, trade diversions are occurring, and several countries are finding themselves unexpectedly benefitting from these tensions. The trade war is expected to stimulate the Indian economy, with predictions of a 3.5% rise in exports. An array of countries are set to reap the rewards from this situation:
| Country | Predicted Percentage Export Gains |
|---|---|
| The EU Members | $70 billion growth in exports |
| Japan and Canada | Over $20 billion increase each |
| Australia | 4.6% |
| Brazil | 3.8% |
| India | 3.5% |
| Philippines | 3.2% |
| Vietnam | 5% |
Potential Drawbacks Amid the Benefits
However, benefits do not preclude adverse effects. The study delineates that even countries experiencing export growth due to trade disruptions may face negative impacts.
The Downside of Trade Wars
The primary concern underlying this scenario is the potential for trade tensions to devolve into currency wars, and disturbances in commodity prices, financial markets, etc. Such fallout could have severe repercussions for developing nations. Additionally, the ambiguity surrounding the magnitude and duration of tariffs prompts producers to delay investment decisions that might turn unprofitable if the tariffs are withdrawn. There’s also a risk of other countries joining and escalating protectionist policies to a global level. This move would violate the rule-based order and potentially affect the weakest nations.
About UNCTAD
Established in 1964, the United Nations Conference on Trade and Development (UNCTAD) endeavours to promote development-friendly integration of developing countries into the world economy. Headquartered in Geneva, Switzerland, UNCTAD operates as a permanent intergovernmental entity. They publish various reports, including the Trade and Development Report, World Investment Report, The Least Developed Countries Report, Information and Economy Report, Technology and Innovation Report, and Commodities and Development Report.
