Opinion

Why America will be the biggest loser in the trade war

BRUSSELS, Belgium (Project Syndicate) — For a while at least, trade tensions between the United States and China seemed to have settled into a “new normal.” After both countries imposed high tariffs on a substantial proportion of each other’s goods, President Donald Trump refrained from further escalation.

But, following another inconclusive round of bilateral trade talks in Shanghai last week, Trump announced that the U.S. will impose 10% tariffs on a further $300 billion worth of Chinese goods, effective Sept. 1.

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Should this new measure take effect, almost all U.S. imports from China will be subject to tariffs. (The U.S. already levies 25% tariffs on $250 billion worth of Chinese imports.) Although the U.S. has also imposed non-tariff barriers in its trade war with China, reciprocal tariffs are the most visible component of the dispute — and are likely to hurt America more than China.

One way to compare the restrictiveness of countries’ trade policies is to look at their average tariff rates. For the U.S., this seems to paint a fairly reassuring picture. Before Trump took office, the average U.S. tariff rate on industrial imports was about 2%, somewhat lower than that of China.

Even under Trump, this figure has (so far) not increased that much. Imports from China account for about one-quarter of all U.S. imports, and the 25% tariff affects about one-half of imported Chinese goods. This implies that the average U.S. import tariff has increased by about three percentage points, to 5% or so, which does not appear excessive.

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