Trade agreement between the United States and China: winners and losers

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Xi Jinping and Donald Trump in 2017

After more than two years of increasing tension, the United States and China have signed an agreement to calm trade frictions. The agreement has been very close, but it is not clear how much economic relief his trade war will offer.

The rates, in some cases at a lower rate, will remain in effect. Analysts say the deal is unlikely to produce enough profits to overcome the losses already suffered.

We take a look at the winners and losers of the agreement.

Winner: Donald Trump

Some critics say there is little substance, but the firm offers an opportunity for U.S. President Donald Trump to leave the trade war behind and claim an achievement before the 2020 presidential elections.

That can be a relief: polls show that most Americans agree with the president that China trades unfairly, but in general they support free trade and oppose tariffs. In fact, Republicans lost several seats in Congress in 2018, a change that economists have linked to the trade war.

Winner: President Xi Jinping

It seems that China will emerge from the firm having agreed to the terms it offered at the beginning of the process, including the relaxation of market access to US financial and automotive companies. UU. In many cases, companies in other countries are already benefiting from the changes.

While President Xi can affirm that he did not simply bow to the demands of the United States, that does not mean that the Chinese are celebrating it. The Federal Reserve estimates that China’s economy has suffered a blow of 0.25%, since the demand for its goods by the United States fell by approximately one third.

Loser: US companies and consumers

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The United States has raised more than $ 40 billion in new fees

The new agreement halves tariff rates on goods worth $ 120 billion, but most of the higher tariffs, which affect another $ 360 billion of Chinese products and more than $ 100 billion of US exports , are still valid. And that is bad news for the American public.

Economists have discovered that costs, more than $ 40 billion so far, are borne entirely by US companies and consumers. UU.. And that figure doesn’t even try to measure lost business due to retaliation.

Overall, the Congressional Budget Office estimates that uncertainty and cost-related costs have reduced 0.3% of US economic growth. UU., While reducing household income by an average of $ 580 since 2018.

The CBO estimates take into account all the new rates imposed since January 2018, not only those involving China, but analysts say that a more limited look would yield similar results.

Loser: farmers and manufacturers

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Manufacturers exposed to tariffs have been affected

The new agreement commits China to boost purchases in manufacturing, services, agriculture and energy of the 2017 levels at $ 200 billion for two years.

Trump has said that could include agricultural products worth $ 50 billion a year.

But other officials have lowered the figure, analysts are skeptical and China has said that purchases will depend on market demand. So far, the main effect on business has been pain.

Farmers, who have been targeted by China’s tariffs, have seen bankruptcies soar, resulting in a federal bailout of $ 28 billion.

Among manufacturers, the Federal Reserve has found job losses, resulting from higher import costs and reprisals from China.

In the long term, US companies can divert Chinese supply chains to avoid tariffs, but that is an expensive perspective.

Winners: Taiwan / Vietnam / Mexico

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Ho Chi Minh City in southern Vietnam, the country’s main manufacturing region

Globally, economists estimate that trade war will reduce more than 0.5% of growth. But some countries have benefited from the fight, which redirected an estimated $ 165 billion in trade.

Nomura analysts identified Vietnam as the country that would earn the most, while the UN discovered that Taiwan, Mexico and Vietnam saw US orders increase last year.

The Fed discovered that the increase in US imports boosted Mexico’s economic growth by just over 0.2%,

It is likely that some of those agreements will be maintained, even with one agreement.

Loser: critics of Washington China

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Trump’s adviser, Peter Navarro, pressed for a tough stance on China

The United States has said that China has agreed to new protections for intellectual property, including reducing the threshold for criminal prosecution and increasing sanctions. Critically, the two sides say they have agreed on a way to resolve such disputes.

Those were some of the problems that apparently triggered the trade war.

But analysts say it is unclear whether the new commitments are different from the promises China has made before. And the new agreement does not address some of the major complaints from the United States about China’s business practices, such as the subsidies it provides to certain industries.

The White House has said it will address additional problems in a second agreement, “phase two,” but analysts say they expect nothing concrete in the short term. The administration has also discussed how to address subsidies with Japan and Europe.

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