Snowball Effect of the US-China Trade War

US China Trade War

The US-China trade war starting March 23rd, 2018 has had a global impact that many have tried to quantify and estimate. No matter how you view it, the trade war does not have a zero-sum effect, but a negative impact overall in the trade ranging many industries and sectors, and ultimately the global GDP.

The first bout exchange started when US imposed 25% trade tariff on machinery and electronics worth 50 Billion USD and followed it up with another 25% trade tariff imposed on mainly plastic products, oils, and other commodities.

China responded with trade tariffs on its own on 128 products worth USD 3 Billion, which was met by another proposed increase of trade tariff to 25% on USD 50 Billion worth of soybean, automotive products, and chemicals.

The exchange continues on with China imposing anti-dumping duties on sorghum on the USA and after a trade talk held between the two economic giants, China hits with a slew of proposals of trade hikes on a laundry list of items, worth an estimated amount of USD 50 Billion.

The war intensifies beginning July 2018 where both nations flex their proverbial muscles as trade tariffs are being enforced by US Customs Border Protection (CBP). A further list of 6000 items with an estimated value of USD 200 Billion is subjected to 10% trade tariff. Naturally, China responded with a list of trade hikes.

The exhaustive trade of trade war punches and blows, tweeted threats, canceled negotiations, and updates on import tariff have, to a certain extent, baffled the world.

China filing complaints to the World Trade Organization (WTO), which has been set up mainly to remove trade barriers and improve the global economy through global trade has heeded no impact on the Trump administration’s resolution.

This has been beautifully tabled down by Dorcas Wong and Alexander Chipman Koty in the China Briefing

WTO has aptly summarized that there has been a seven-fold increase in import restriction in the form of levy and tariffs since 2017, resulting in an increase of global cost of USD 588.3 Billion

Zooming into the impact it potentially has on the shipping industries, intuitively, global supply and demand will shift, causing a shift in cargo flow. A.P. Moeller-Maersk has reported first-quarter losses and COSCO estimated that Tras-Pacific Trade flow will decrease by 10% year on year.

Donald Hanna from CIMB Group Berhad Malaysia encapsulates the polarizing impact of this war on Malaysia and Singapore economy. He states that china’s handicapped growth by the trade war by 1.0 to 1.5% will affect the rest of the world with 0.3% to 0.5% decrease in growth, the deceleration of growth is evidently from the increased cost of doing business resulting from this trade war.

However, the net effect of loss in growth is dampened by trade diversions gained from the trade war, despite having a lesser effect that the initial negative impact stated. Trade redirection requires some adjustment from manufacturers and businesses and the effect of it may show up in the future. Having said that, the immediate short term effect has been negative so far.


Hello! I'm Kelvin, I work as a custom broker and I'm thrilled with having the experience to share my industry knowledge with you. I hope that you enjoy reading them as much as I do posting them.

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