Import tariffs introduced by the United States and China in September will see Chinese exporters bear approximately 75% of the costs, with the US extracting a net welfare gain of USD 18.4 billion, according to new research from EconPol Europe.

The tariffs affect around 50% of Chinese products imported to the US, with a value exceeding USD 250 billion. The tariffs introduced by China affect around USD 60 billion worth of goods. The research shows these new tariffs, introduced on 24 September, will increase US consumer prices on affected Chinese products by an average of 4.5%, while the producer price of Chinese firms declines by 20.5%.

The strategically-levied US import duties on goods with high import elasticities will see Chinese firms pay approximately 75% of the tariff burden, and decrease exports of affected goods to the US by around 37%. The result will be a drop of 17% in the UUS-China trade deficit, say researchers, contrary to public opinion that the burden falls on American consumers.

The additional tariffs generate revenues of around USD 22.5 billion, which could subsequently be redistributed in the US. Authors Gabriel Gelbermayr and Benedikt Zoller-Rydzek say, although the tariffs introduce a distortion to US consumption decisions, the economic costs are shifted to Chinese exporting firms with the US government able to extract a net welfare gain of USD 18.4 billion.

“Tariffs are nothing else than taxes whose burden is shared between foreign producers and domestic users,” says report co-author Gabriel Felbermayr. “In the case of the US-China trade war, three quarters of the cost of US tariffs are indeed shifted to Chinese producers, with the US reaping very substantial revenue effects.”

The tariffs, which affect a range of consumer goods, are the latest round in an ongoing trade war between the US and China, with the Chinese government saying the US had “brazenly preached unilateralism, protectionism and economic hegemony.”

“That’s the problem with protectionism,” concludes EconPol researcher Felbermayr. “It can actually pay off economically for the US.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD holds above 1.0200 amid renewed dollar weakness

EUR/USD holds above 1.0200 amid renewed dollar weakness

EUR/USD has extended its recovery after having advanced beyond 1.0200 in the American session. The greenback continues to weaken against its rivals amid the positive shift witnessed in market mood and fueling the pair's recovery in the second half of the day.

EUR/USD News

GBP/USD clings to modest daily gains above 1.2100

GBP/USD clings to modest daily gains above 1.2100

GBP/USD continues to trade in positive territory above 1.2100 and remains on track to post daily gains. The improving market mood is making it hard for the dollar to outperform its rivals ahead of this week's key inflation report, allowing the pair to stretch higher.

GBP/USD News

Gold bulls looking to overcome the $1,800 barrier

Gold bulls looking to overcome the $1,800 barrier

Gold advanced on Monday, reaching an intraday high of $1,790.01 a troy ounce during the American afternoon, holding nearby. The greenback gave back the Nonfarm Payrolls report-inspired gains and eased on the back of retreating US government bond yields.

Gold News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Are your bags packed for FOMO Season?

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Are your bags packed for FOMO Season?

The crypto market shows strength to start the second trading week of August, and key levels have been identified. Although it's still early market, current prices may be the ultimate discount in hindsight.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures