Baku, Azerbaijan, July 8
By Leman Zeynalova – Trend:
The implications of the US-China trade war for the medium-term are not optimistic either as there are two adverse effects of this trade tension, Alexander Apokin, Energy Economics Analyst at Gas Exporting Countries Forum (GECF) told Trend.
First, according to the expert, the tariffs have already started impacting the global value chains (GVCs).
“According to the UNCTAD, 17.3 percent of Chinese exports are made with foreign components, and the US is the second-largest foreign input provider (11.2 percent of foreign content), mainly of “other business services” that typically include financial services and software. On the other hand, China is the main foreign input provider for US export within the GVCs. Redistributing supply chains to avoid tariff damage would take multinational companies several years but it will strand the investment already made and increase the costs for the final consumer,” he noted.
Secondly, while the prospective terms of trade stay unclear as they are, the increased uncertainty will impair new investment decisions worldwide, Apokin believes.
“An AmCham survey in December 2018 among 314 branches of large American companies in China indicated that 30 percent has had a negative financial result in 2018, and two thirds of them aim to significantly change their strategy after 2018, even before the May tariff hike. While the full effect is harder to quantify, the changing China trade patterns with Japan and Korea suggest that the impact is wider than just the two counties,” he added.
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