New Study of China Tariff War’s Biggest Losers Shows ‘Surprising Results’
New research suggests the U.S.-China trade war hurt U.S. importers more than their Chinese counterparts.
A discussion paper published this month by the economy, politics and society (EPoS) research center at the Universities of Bonn and Mannheim calculated that American importers bore 93 percent of U.S. tariffs, while Chinese importers shouldered just 68 percent of China’s tariffs. U.S. exporters paid the other 32 percent, the researchers concluded.
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“We analysed how the tariff burdens were shared between importers and exporters and got some surprising results,” Lei Li, assistant professor of applied microeconomics at the University of Mannheim and one of the paper’s three authors, said in a statement. “Chinese importers paid about two-thirds of China’s tariffs. Yet, U.S. importers shouldered 93 percent of price increases due to U.S. tariffs. Such a near-complete ‘pass-through’ is uncommon and astonishing given the power of the United States to influence terms of trade.”
The paper estimated that Chinese tariffs cost Chinese importers $180 million and $510 million per month in 2018 and 2019, respectively, while U.S. tariffs cost U.S. importers $1.21 billion and $2.47 billion per month over the same period.
The researchers attributed the “puzzling” difference to the two countries’ different import structures and product heterogeneity in pass-through—the degree to which changes in import tariffs are passed through to importers. Whereas the U.S. imposed tariffs on products with higher pass-through, such as electronics, China imported products with lower pass-through, such as agricultural goods.
The paper’s authors concluded that this mismatch derived from the differing goals of the two countries’ leaders. Where the administration of former president Donald Trump appeared “primarily concerned” with future competition in high-tech sectors, the Chinese government wanted to hit U.S. exporters “as hard as possible” so as to end the trade war as quickly as possible, the authors wrote.
Five years on, however, the Trump-era tariffs remain in place with little sign of change. Following a customary four-year review, the United States Trade Representative said in September that the government had no plans to amend the Section 301 tariffs.
Some in Congress are calling for further hikes. Earlier this month, Sen. Josh Hawley (R-Mo.) proposed legislation aimed at lowering the United States’ trade deficit with China that would increase duties on the nation by 25 percent. At the same time, legislators from both sides of the aisle are pushing for further crackdowns on China in response to the government’s oppression of Uyghurs and other minority ethnic groups in Xinjiang.
