Analysis: U.S. tariffs on China may simply widen door to other countries
In attempting to punish China for its trade practices, President Donald Trump may open the door for other countries to grab U.S. market share, including Mexico and Japan, which he has also targeted with sharp trade rhetoric.
According to detailed U.S. import data those nations are among the top alternate suppliers of some 1,300 product lines due to be hit with a 25 percent tariff if they are imported from China, and the possible winners of such an abrupt shift in relative prices.
Mexico already ships about $6 billion of flat-screen televisions to the United States, about twice that of China, while Thailand`s $3.5 billion in hard disk drive exports to the United States is about four times that of China.
Japan, Malaysia and Vietnam are all rivals in the market for printer parts.
Shifts to those and other countries won`t happen overnight. The list of hundreds of goods Trump wants to tax is subject to appeal and could be withdrawn if, as some analysts suspect, the aim is to reach a negotiated settlement with China over broader trade issues.
The U.S. Trade Representative`s office deliberately targeted products that could be sourced elsewhere in devising its China tariff list, which was aimed at inflicting maximum pain on Chinese exporters and minimum pain on Americans. An algorithm developed to choose the products ranked them according to their impact on U.S. consumers, and products readily available outside of China were given a lower impact rating, a USTR official told Reuters.
"A proposed product list was then compiled by selecting products with the lowest consumer impact from the ranked list," the official said.
Former U.S. Deputy Trade Representative Robert Holleyman said, "I do think that it is designed in part to allow shifts in supply chains over time," rather than try to outright curb U.S. imports regardless of the source.
Though he said the use of tariffs has put key U.S. industries like agriculture and aerospace at risk, "the administration did do some careful analysis on this. They tried to minimize some direct damage on U.S. consumers."
According to U.S. census data, despite some high-profile items, like televisions, the list seemed tilted toward goods with less Chinese market penetration. However research firm Panjiva noted that in some cases, such as thermostats, China supplies in excess of 40 percent of U.S. imports, with alternatives perhaps less available.
Several dozen of the items, including a list of drugs like epinephrine and veterinary vaccines, registered no imports in 2017. The weighted market share of those with a least a dollar of imports was 7.7 percent.
That may be good news in terms of the consumer impact of the tariffs. But it also shows the complexity Trump faces in trying to reorganize a tightly integrated global economy.
TCL Multimedia , China`s largest television maker, said it would shift some production to a plant it has in Mexico, underlining the difficulty of targeting imports in a world of multinational companies with several production bases.
While the tariffs may indeed pose a cost to Chinese businesses, they are unlikely to shift much production to U.S. firms. Meanwhile, U.S. companies will have to find alternative sources for more expensive imports, if they can, and those industries on the receiving end of Chinese retaliation will also suffer.
"If this is a long-term strategy to put in place and maintain tariffs on Chinese inputs to change the trade deficit with China, then that is problematic, because the retaliation will stay in place and that will hurt large classes of exporters," Holleyman said.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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