Escalation of US-China bilateral tariffs to shave off $1tn from US economy | 2019-03-20 |

Escalation of US-China bilateral tariffs to shave off $1tn from US economy

20 March, 2019 12:00 AM printer

WASHINGTON: An escalation of US-China bilateral tariffs will shave off 1 trillion U.S. dollars from the U.S. economy in a decade and inflict a particular damage on the information and communications technology (ICT) sector, according to a recent study released by the U.S. Chamber of Commerce, reports Xinhua.

"Escalation of bilateral tariffs results in lower GDP, lower employment, lower investment, and lower trade flows for the United States," said the study titled "Assessing the Costs of Tariffs on the U.S. ICT Industry."

The collaborative work of the chamber and the research firm Rhodium Group was published on Friday. It found that the tariff measures would cost the U.S. GDP from 45 billion dollars to 60 billion dollars in the first year following the imposition, and the figure grows to range from 89 billion dollars to 125 billion dollars annually five years later.

Cumulatively, the study said, the U.S. economy stands to come up 1 trillion dollars short of its baseline potential within 10 years of tariff implementation. The U.S. GDP in 2018 was approximately 20.5 trillion dollars.

Tariffs are also expected to "shave up to one-third of a percentage point" in total factor productivity from real U.S. GDP growth, "threatening a key channel for transmission of the benefits of an open ICT sector to the economy," said the study.

Furthermore, the Chamber contends that U.S. tariffs on Chinese goods linked to Beijing's high-tech industrial policies "would not result in meaningful onshoring of U.S. ICT production." It said U.S. domestic ICT production must meet a 3 to 4 percent annual rise in demand as higher prices lead to reduced imports.

ICT manufacturing, the study said, is one of the industries that are built on globalized trade and production networks. These industries, according to the study, "are most exposed to negative impacts."

Due to the tariffs, U.S. ICT goods exports would reduce by 14.2 percent to 20 percent in the five years ahead, the study said, adding that the country's ICT imports would fall by 9 percent to 10 percent during the same period.

The study said higher U.S. import tariffs would not only "disproportionately hit U.S. manufacturers who rely on lower-cost inputs shipped from China," but also compel ICT-related businesses to reroute global supply chains to regional supply chains. The options, the study suggests, are limited given the uneven spread of ICT merchandise production capacity globally.

"In all scenarios, ICT merchandise production falls in China and grows in Canada and Mexico," the study said. "While East Asian countries would experience a boost in ICT merchandise production, other Asian countries see lower-than-baseline output."