President Donald Trump is succeeding in making China pay most of the cost of his trade war.
That’s the conclusion of a new paper from EconPol Europe, a network of researchers in the European Union. U.S. companies and consumers will only pay 4.5 percent more after the nation imposed 25 percent tariffs on $250 billion of Chinese goods, and the other 20.5 percent toll will fall on Chinese producers, according to authors Benedikt Zoller-Rydzek and Gabriel Felbermayr.
The trade dispute between the U.S. and China is showing slim hope of abating as the leaders of the two nations prepare to meet in Argentina this month. According to Zoller-Rydzek and Felbermayr, the tariffs will do what Trump has longed for: They will cut American imports of affected Chinese goods by more than a third, and lower the bilateral trade deficit by 17 percent.
The Trump administration selected products with the highest “price elasticity,” or high availability of substitutes, according to Zoller-Rydzek and Felbermayr. The Chinese products hit by Trump’s tariffs can mostly be replaced by other goods, forcing exporters to cut selling prices to keep buyers.
“Through its strategic choice of Chinese products, the U.S. government was not only able to minimize the negative effects on U.S. consumers and firms, but also to create substantial net welfare gains in the U.S.,” the researchers wrote.
The U.S. is due to raise duties on the largest $200 billion tranche of goods to 25 percent from 10 percent on Jan. 1. In retaliation, China has slapped tariffs on $110 billion in imports from the U.S. and effectively shut off its purchase of key American agricultural exports including soybeans.
With the economic costs shifted to China, the U.S. levies will lead to a $18.4 billion net gain for the American government, the researchers wrote.
“As the trade conflict escalates, however, the U.S. administration may not be able to restrict its selection to products with high import elasticities,” they wrote. “And U.S. welfare might decrease as more of the tariff incidence falls on U.S. consumers.”
The Naira on Thursday gained marginally against the dollar at the parallel market in Lagos, the News Agency of Nigeria (NAN) reports.
The Nigerian currency gained 50 kobo to close at N358, stronger than N358.5 traded on Thursday, while the Pound Sterling and the Euro closed at N480 and N418.5 respectively.
At the Bureau De Change (BDC) window, the naira closed at N360 to the dollar, while the Pound Sterling and the Euro closed at N480 and N418.5 respectively.
The naira, however, appreciated at the investors’ window, closing at N361.45, stronger than N361.68 traded on Thursday, while it was sold at N305.90 at the Central Bank of Nigeria official window.
Meanwhile, Mr Godwin Emefiele, CBN Governor, said that Nigeria performed very well among emerging markets in Africa.
Emefiele in an interaction with newsmen at the end of the Monetary Policy Committee (MPC) meeting in Abuja, added that the foreign exchange market had remained stable.
According to him, the apex bank had enough buffers to defend the naira.