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China vs US trade rigidity have caused a wide and negative effect on both producers and consumers. The stress in the tariffs have decreased if not stopped trades between the two countries, although the bilateral trade shortfall remains unchanged. The impact on global heightening is relatively modest currently, the latest abbreviation will significantly disrupt businesses together with financial market point of view, disrupt supply chains and jeopardize the recovery of global growth.
The raising US tariffs on annual Chinese imports accompanied by the Chinese retaliation demonstrates the US- CHINA trade tensions and the effects are already evident in the trade database.
Similarly in 2018 US imposed tariffs on three lists of goods from China targeting first 34 billion US dollars of yearly imports, followed by 16 billion more and finally 200 billion. As a result Us imports from China sharply decreased in all ” three groups” of goods on which tariffs were imposed.
Consumers in both countries are the ones who suffer the most due to trade tensions between the two countries. Some of the tariffs are passed down straight to the consumers while some are absorbed by the importing firms via lower profits margins.
It’s most likely that further increase in tariffs will be passed down to the consumers , while direct impact in inflation may seem insignificant it might lead to broader effects via increase in prices by domestic competitors.
Failure to resolve the trade tension between US- CHINA will disrupt global supply chain and slow the spread of new technologies in the long run lowering global productivity and welfare denting business and financial business sentiment and the impact will be most felt in the low income households.
