Category Archives: China trade war

26/6/20: Trade Restrictions: European Companies

BOFIT newsletter out today highlights the scale of restrictive trade measures applicable to the EU exporters across a number of significant markets:

Of eleven countries included, three managed to lower trade and investment barriers applying to the EU companies over 2017-2019 period, two countries had unchanged barriers, and six showed increasing barriers to trade and investment. In a way, this reflects a shift away from trade and investment globalization focus on the last three decades toward more regionalized and even protectionist policies.

COVID19 pandemic is likely to accelerate this trend.

2/9/19: Trump’s Tariffs of War…

Two charts summarizing the effects of the ongoing Trump Trade War on U.S. tariffs (overall, first chart) and on bilateral U.S.-China trade (second chart)

Source: @Soberlook

In the mean time, China's tariffs vis a vis the rest of the world are falling:
Source: ibid.

Someone is winning in this war (maybe Europeans or others but it ain't the U.S.

22/7/19: What Import Price Indices Do Not Say About Trump’s Trade War

A few days ago, I saw on Twitter some economics commentators, not quite analysts, presenting the following 'evidence' that Trump tariffs are being paid for by China: the U.S Import Price index has declined in recent months, to below 100. In the view of some commentators, this signifies the fact that the U.S. is now paying less for imports from the ret of the world because Chinese producers are taking a hit on tariffs imposed onto their goods by the Trump Administration and do not pass through these tariffs onto the U.S. consumers.

The argument is a total hogwash. For a number of reasons.

Firstly, as the U.S. Bureau of Labor Statistics notes (see, import price indices do not incorporate tariffs and duties charged at the border. They actually explicitly exclude these. The indices do not include any taxes, by design.

The indices are quality-balanced, so they are rebalanced to reflect relative quality of goods and commodities supplied. If the U.S. importer gets a better quality (new model, improved model etc) of a good from the exporting country for the same price as the older model, this registers as a decrease in the import price index.

Worse, as BLS notes: "Import/Export Price Indexes cannot be used to measure differences in price levels among different products and services or among different localities of origin. A higher index number for locality A (or product X) does not necessarily mean that prices are higher than for locality B (or product Y) with a lower index number. It only means that prices have risen faster for locality A (or product X) since the reference period."

Note the words: "reference period". Which leads to yet another major problem with the argument that BLS index shows that 'China is absorbing tariffs costs' from the Trump Trade War: it is based on a spot (one point) observation. So let's take a look at the time series. Remember, Trump Trade War started at the very end of 1Q 2018 (March 2018). So here are 'reference period' consistent comparatives for import price indices for a range of regions and countries:

What the chart above tells us is that over the period of the trade war so far, U.S. imports price index indicates some deflation of imports costs, somewhere in the region of 1.13 percentage points. But over the same period of time, China index experienced a decline of 1.36 percentage points. If China is 'paying for U.S. tariffs', the U.S. is paying more than China does, which is of course, entirely possible, but immaterial to the data at hand.

Worse, if declining import price indices are an indicator of a country 'paying for tariffs', well, Canada seems to be paying for most of the Trump Trade War globally, while Japan is paying a little-tiny-bit. Tremendous! Art of the Deal! And all the rest applies.

Of course, what the declines in the vast majority of import price indices suggests is the opposite of the 'China is paying for the U.S. tariffs' story. Instead, they tell us about the inherent weakening in the global demand, the deflationary pressures in key commodities markets (yes, oil, but also soy beans, etc), the deflationary pressures from new technologies and, finally, the changes in currencies valuations.

No, folks, there are no winners in the trade wars, but there are smaller losers and bigger losers. When you impose tariffs on final and intermediate goods, consumers and producers loose. When you impose trade restrictions on imports of basic commodities, without altering global markets supply and demand, you are simply substituting suppliers (see  The latter change might involve some costs, but these costs are much lower than restricting trade in higher value added goods.

14/5/19: Agent Trumpovich Fails to Deliver… Again…

In the months following China's retaliatory introduction of tariffs on U.S. soybean exports, both traditional and social media were abuzz with the screeching sound of 'analysts' claiming that Trump Administration trade war with China is a boon to Vladimir Putin's Russian economy.

Behold this from the

 Alas, given that Russia supplies less than 1% of Chinese imports of soybeans, it might take a major Congressional investigation and a few PoliSci 'Russia experts' to get serious imaginary beef on the Trump Administration's alleged Russia-benefiting policies. Here is the data from ... well... Bloomberg, via Global macro Monitor ( showing that Russia is hardly a major winner from Trump's Trade Wars when it comes to soybeans:

Let's put the thin blue line of 'Russia winning, thanks to Trump' through some analysis:
  1. There is no dramatic massive rise in Russian exports of soybeans to China in 2018, and some dip in 2019.
  2. 2018 increase - moderate - came in after 2017 moderate decrease.
  3. Russian exports of soybeans to China have been rising-falling-rising very gently since 2013.
Friendly Canada quietly dramatically increased its sales of soybeans to China in the wake of the Trade War, although its exports were rising since 2015. Argentina also acted as a substitute supplier to China during the Trade War period so far, but that increase came on foot of massive collapse in exports to China since the start of this decade. In fact, while the U.S. share of Chinese imports of soybeans fell 30 percentage points, Brazil's share rose 35 percentage points. Trump's Administration-triggered Trade War with China has helped Brazil first, followed by Canada and Argentina. Russia hardly featured in this dastardly plot to serve Vladimir Putin's interests by Agent Trumpovsky.

Sorry, my dear friends in American mass media. You've faked another factoid.