2 percent blow threatens global trade

As far as US President Donald Trump is concerned, US import tariffs on Chinese products will rise to 25% later this year. If this continues, world trade will suffer a 2% blow, according to calculations by Euler Hermes.

As of Monday, September 24, the United States (US) will charge a 10% import duty on goods from China, with a combined value of $200 billion. President Trump has already announced to raise the tariff to 25% if China does not sign an agreement with the US to ease tensions on the trade front.

In response, China has since introduced new import tariffs (10%) for many American products (value $60 billion), such as liquefied gas. And Alibaba boss Jack Ma has cut 1 million jobs that the Chinese company wanted to create in the US.

Back to 1980 level 
The introduction of the 10% tariff on a large group of Chinese products brings the average US import tariff to 5,2%. That level was last reached in 1980. Before the Trump presidency, the average US rate was around 3,5%. If the US raises the rate from 10% to 25%, the average US rate will be 6,7%.

It has a negative effect on world trade. In all wars there are countries and sectors that manage to take advantage of this, but in general it is negative. The business climate is sour, causing investments to be postponed. It is also an important factor in the impending decline of the western economies.

Delay
The import duty is not only bothering China, but also many American companies. This concerns an investigation by 2 American chambers of commerce in China (AmCham China and AmCham Shanghai). Many hundreds of American companies have offices in China. They see their turnover continue to decrease every day. And what about the cooperation with the Chinese government?

The licensing process is suddenly a lot slower. We are talking about the largest American companies. Ultimately, the bill will fall on the consumer, partly because inflation is rising as a result of the conflict. Many CEOs of publicly traded companies have knocked on Trump's door to avoid exaggerating the trade war. This is because of the negative impact on their own companies.

Global Impact
Import tariffs affect the economy across the board. Sectors that at first sight are not directly involved are also feeling the consequences of the trade war. We are then talking about global production chains. So suppliers of parts and semi-finished products are also included. The Netherlands is also part of this.

Incidentally, I also see opportunities for Dutch entrepreneurs. I am referring, among other things, to Dutch technological knowledge and far-reaching innovations in the agricultural and food sector. Chinese love it. And if they can get past the American companies, then they won't fail. One's death is another's bread.

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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