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10/09/2018
Economic Publications

US Trade Protectionism: what are the knock-on effects on global value chains?

US Trade Protectionism: what are the knock-on effects on global value chains?

While policies to open up trade have been a standard feature since the creation of the World Trade Organization (WTO) in 1995, the 2008-2009 crisis proved a turning point. The crisis boosted protectionism, which then climbed to new levels with the arrival of Donald Trump as President of the United States. Since early 2018, the US government has kept its word on several of its threats in terms of trade protectionism by launching customs duties on imports for various products: solar panels and washing machines (January), as well as steel and aluminium (March, then in June for the EU, Mexico, and Canada, concluding with Turkey in August). Over the fi rst three quarters of 2018, the US, government then started officially taxing Chinese imports (worth USD 50 billion in July, plus another 200 billion in September). The US government therefore decided to restrict trade aff ecting 12% of imports to the United States. Meanwhile, retortion policies hit 8% of US exports.

The most obvious effects of this radical change of direction in US trade policies will clearly be felt by the trade partners specifically targeted by these policies. These direct eff ects must be evaluated, but this approach is not enough to appraise the scale of the impact on world trade. The aim of this study is to attempt to quantify the knock-on eff ects of US policies for the trade partners of the countries targeted.

The moderate negative impact of US customs duties on exports is brought to light thanks to our estimation of valueadded exports in 12 business segments from 63 countries f rom 1995-201 1 : increasing US tariff s by one percent for any given country leads to a 0.46% decrease in value-added exports from a partner country to the country targeted by the customs duties, all things being equal. If our estimation is limited to manufacturers, which are generally more incorporated in international value chains, increasing US tariff s by one percent will decrease valueadded exports by 0.6%. This indirect impact is particularly high for segments such as transport (including the automotive sector), machines and equipment, and electronics. In contrast, this eff ect is less signifi cant for food products, whereas metals, chemistry, mining, textiles, and agriculture are not severely aff ected.

 

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Contact


Jonathan PEREZ

T. +81 3 5402 6108 
jonathan.perez@coface.com

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