Latest in US-China Trade War:Thorough analysis on additional tariff by product

Beyond model analysis (China -0.17%, US -0.15%, and Japan -0.01%)


September 21, 2018

  • Shunsuke Kobayashi
  • Yota Hirono


◆President Trump decided to levy additional tariffs on the equivalent of around 200 billion dollars in Chinese imports. Meanwhile, China has decided to implement retaliatory tariffs on the equivalent of approximately 60 billion dollars in American products. In this report we examine additional tariff rates per item and the total amounts in tariffs associated with tariff policies which have already been publicly announced (US 50 bil dlrs + 200 bil dlrs, and China 50 bil dlrs + 60 bil dlrs).

◆According to our analysis, US tariffs on Chinese products effect a total of 235.3 billion dollars in imported items. Tariffs totaled 30.5 billion dollars in 2018, and are expected to reach a total of 58.8 billion dollars in 2019. The average additional tariff rate imposed per product was 13.0% in 2018, and is expected to reach 25.0% by 2019. As for types of products affected, the greatest weight goes to various types of machinery and electronic devices. On the other hand, Chinese tariffs imposed on US products total 115.8 billion dollars in imported items. The total amount in tariffs is 17.5 billion dollars with the average tariff rate per item at 15.1%. As for types of products affected, the greatest weight goes to automobiles, soy beans, machinery of various kinds, electrical generators, and control devices as well as other electrical devices.

◆We have taken into consideration changing assumptions as this situation develops, and using the DIR macro model, have re-estimated the effects of tariffs on the Japanese, Chinese, and US economies Looking at the results of our estimate of economic effects assuming the US freezes its additional tariff rate on 200 billion dollars at 10%, we see that the negative effect on GDP would be as follows: China -0.17%, US -0.15%, and Japan -0.01%. Meanwhile, if the US raises its additional tariff rate to 25%, negative effects are estimated to be as follows: China -0.22%, US -0.28%, and Japan -0.02%.

◆It should be kept in mind, however, that these are merely estimated values according to our computation model. The model cannot illustrate the ripple effects when a particular item or a particular industry is especially severely affected by tariffs. According to OECD estimates, as of the year 2011, Japan provided value-added input on a total of as much as 24 billion dollars’ worth of items ultimately exported from China to the US. Of this, 15.2 billion dollars were accounted for by items associated with computers and electronic parts. As for this industry in particular, the situation does not allow for much optimism.

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