Global trade at crossroads: U.S.-China trade war a lose-lose situation, says S&P

SINGAPORE - The direct economic effects of the U.S.-China tariff dispute have so far been limited, but that may be about to change as the countries escalate their rhetoric - and their actions - in what could soon be a full-blown trade war, says a new report from global ratings agency Standard and Poors.

An escalation of the current U.S-China trade dispute to a trade war that adds a 25% tariff on all nonfuel goods between the two largest economies could shave roughly one percentage point off U.S. GDP by 2021; for China, the loss to GDP would be around six-tenths of one percent, the report says.
 
"Attempts to help those hurt by globalisation via higher tariffs or other forms of protectionism, even if well meaning, will raise prices and hurt all consumers, especially poor and middle-class families," said S&P’s U.S. Senior Economist, Satyam Panday.
 
"Not to mention damage the competitiveness of companies that import raw materials and components from other countries and folk who work in export industries."
 
Seeing trade deficits as invariably bad is off base; in fact, a trade deficit associated with larger volumes of both imports and exports could be more effective in raising living standards than a trade surplus in which trade volumes are low, the report says.
 
"The U.S. focus on trade imbalances with China detracts from the resolution of pressing multilateral issues, including market access and investment restrictions in China, which would be more beneficial for all sides," said Panday.  www.standardandpoors.com (ATI).