Trade Diversion Effects and Export Losses Generated by Tariffs for the Chinese and the U.S. Exporting Sectors in the Context of the Trade War

Cristian Inderkumer

Abstract: In 2018 the U.S. imposed tariffs on Chinese imports. Immediately, China retaliated. Therefore, a trade war started. In this context, the question investigated is: what are the effects of the tariffs for Chinese and U.S. exporting sectors? The methodology is based on empirics. To assess trade diversion effects and export losses generated by tariffs this paper presents descriptive statistics making use of the Trade Map datasets at the HS2 level from the International Trade Centre. The research compares the trade patterns of the first half of 2019 with the ones of the first half of 2018. In this sense, the results show that a) the effects of tariffs imposed by the U.S. generated trade diversion effects to the detriment of Chinese exporting sectors (U$S 32 billion losses) and to the advantage of other regions (U$S 35 billion); and b) the effects of the tariffs imposed by China caused export losses for American exporters (U$S 25 billion). Some regions benefitted from this situation. However, the decrease of Chinese imports from the U.S. was not followed by additional imports from other regions, but for a big fall (U$S 19 billion). Therefore, the trade loss was U$S 44 billion.

Keywords: International Trade; Tariffs; Trade Barriers; Trade Diversion; Trade War