Who benefits most from US-China trade war: Chinese ‘province’ Taiwan

American consumers pay more now; imports from others significantly up; no gains for US Inc: UNCTAD report 

By DTE Staff
Published: Wednesday 06 November 2019

The ongoing trade war between the United States and the People's Republic of China seems to be not benefiting the former while indirectly leading to a windfall for the Republic of China — or Taiwan.

In the first six months of the 2019 financial year, Taiwan’s export to the US has picked up substantially as Chinese export declined. Taiwan has gained by $4.2 billion from the surge in export to the US. This is the highest among countries that have recorded increases in exports to the US after its trade-war resulted in reduction of Chinese exports.

The United Nations Conference on Trade and Development (UNCTAD) released a study, Trade and trade diversion effects of United States tariffs on China, on November 5. According to it, the biggest fallout of the trade war has been the trade-diversion effect — trade being diverted to other countries to fill the vacuum left by the absence of Chinese exports to the American market.

Imposition of tariffs by the US and China on each others’ exports led to a major distortion to global trade. Imposition of tariffs on Chinese exports led to a 25 per cent loss in the most populous country's export to the US. This was worth $35 billion in the first half of the current financial year.

This resulted in gains for Taiwan (which China claims to be its province) by selling more office machinery and communication equipment to the US, according to the report.

The next biggest beneficiary is the European Union (EU). It gained about $2.7 billion from additional exports to the US. Vietnam also emerged a big gainer. Given the size of the its economy, increase in Vietnam’s exports to the $2.6 billion was significant. South Korea, Canada and India gained too but not much.

Chinese firms, however, retained 75 per cent of their export to the US despite the higher tariffs.

The study makes it clear that the trade war has impacted American consumers the most: “The ongoing US-China trade war has resulted in a sharp decline in bilateral trade, higher prices for consumers and trade diversion effects (increased imports from countries not directly involved in the trade war).” US companies have passed on the rise in cost due to increased tariffs on to consumers.

Chinese companies, on the other hand, have made up for losses by reducing export prices and diverting to other countries.

“The results of the study serve as a global warning. A lose-lose trade war is not only harming the main contenders, it also compromises the stability of the global economy and future growth,” Pamela Coke Hamilton, UNCTAD’s director of international trade and commodities, said. 

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