Canada and Mexico are stepping in
Study: Biden’s tariffs against China have no consequences for global trade
May 15, 2024, 6:43 p.m
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The US is increasing tariffs on a variety of Chinese products. A study now shows that this has almost no consequences for world trade and trade in Europe. The tariffs primarily affect products and industries that are already subject to taxes.
According to a study, the announced higher US tariffs on products from China are likely to have almost no consequences for global trade and trade in Europe. As the Kiel Institute for the World Economy (IfW) announced, other countries, especially Canada and Mexico, will absorb the lost imports. What is worrying, however, is a possible spiral of reactions and counter-reactions.
The USA announced on Tuesday a significant increase in tariffs on a variety of Chinese products. This affects, among other things, electric cars, semiconductors, minerals and medical devices. For example, the tariff rate on Chinese electric cars will rise dramatically from 25 to 100 percent.
According to the IfW, this also has no impact on world trade or European trade. The research institute’s simulations showed that the tariffs imposed only cause small trade shifts that are hardly significant in absolute terms.
Alternative markets are likely to be Canada and Mexico, and 0.7 percent more electric cars could go to the EU than before. At 12,000 cars, the number of electric cars imported from China to the USA is so small that a diversion to other markets is “practically not noticeable”. The US government’s measure is primarily motivated by domestic politics. The EU, meanwhile, is China’s most important buyer for electric vehicles. That gives her a certain negotiating power.
“The Commission should not stand idly by and watch Beijing’s subsidy policy, but it should also not allow itself to be exploited by the USA,” explained Julian Hinz, trade researcher at the IfW. First of all, the Commission should stick to its anti-subsidy procedure. The overall package of new tariffs includes a three percent decline in US imports from China, explained the IfW. The tariffs therefore primarily affect products and industries that have already been subject to tariffs in recent years. The semiconductor sector is particularly relevant. Here too, the IfW sees “almost no effect”.