US-China Trade War Global Impact

Last Wednesday (15 January), China and the United States signed ‘phase one’ of their bilateral trade deal to halt an immediate further escalation in tariffs by either country. Phase 1 does nothing to relax the tariffs imposed over the last couple of years to the detriment of global growth.

• By the end of 2019, the US and China had imposed 20 percent import tariffs on more than 60 percent of bilateral merchandise trade turnover, a reduction of global GDP growth in 2019 by an average of 0.5 percentage points.
• While the data below clearly indicates that the United States dug in to the detriment of Chinese exports to the US, Chinese imports from the United States already began recovering in late 2019 compared to 2018 levels.

So, what does the Phase 1 deal promise for 2020? We expect trade uncertainty will continue weighing on global economic growth in 2020 as it has throughout 2019 but that the cost of the US-China trade war itself in terms of the global economy will be lower. Under the phase one agreement, China will purchase $200 billion worth of agricultural products and other commodities from the United States within the next two years, which is some relief. In exchange, Washington canceled a planned tax increase on Chinese goods, initially scheduled for December 2019, but will continue to enforce inflated tariffs on many Chinese goods.

View original infographics, live dashboard and download data at knoema.com