United Nations says European Union could win big in US-China trade war

U.S.-China tariff hike would trigger downturn, trade diversion: U.N

EU could be big winner in US-China trade war

The US levied additional duties of between 10 and 25 percent on Chinese goods a year ago as punishment for what it called unfair trade practices. "The implications for the entire worldwide trading system will be significantly negative".

Amid tit for tat tariff hikes between Washington and Beijing, trade is being diverted and a handful of countries will capture a slice of the giants' exports, said the report by the UN Conference on Trade and Development (UNCTAD) on Monday February 4.

"Countries that are expected to benefit the most from US-China tensions are those which are more competitive and have the economic capacity to replace US and Chinese firms", UNCTAD said.

The UN's report, titled The Trade Wars: The Pain and the Gain, said "bilateral tariffs alter global competitiveness to the advantage of firms operating in countries not directly affected by them".

The U.S. originally meant to boost its tariff on Chinese goods from 10% to 25% on January 1st, but the two sides agreed to a 90-day delay as they worked to reach a trade deal.

The US and China have a deadline of 1 March to strike a deal, or the US has said it will increase tariff rates on $200bn (£152bn) worth of Chinese goods from 10% to 25%.

In a bid to meet the US' demand of bringing down the United States dollars 375 billion bilateral trade deficit, China has pledged to take measures to step-up American imports and investments.

"The implications are going to be massive", Pamela Coke-Hamilton, head of worldwide trade at UNCTAD, told a news conference.

The study found that USA firms will only pick up 6% of the $250bn in Chinese exports that are subject to U.S. tariffs.

A similar scenario would apply to the $110 billion in United States exports hit by Chinese tariffs, the report said, estimating that 85 percent would go to companies in other countries, 10 percent would remain in the USA and only about five percent would go to Chinese firms.

The study found that European exports will grow by $70bn, while Japan, Canada and Mexico will see exports increase by more than $20bn each.

"But because the magnitude and duration of tariffs is unclear, Brazilian producers have been reluctant to make investment decisions that may turn out to be unprofitable if the tariffs are revoked", the United Nations agency said.

The China-driven rise in soybean prices in Brazil has also pushed up costs for local businesses that need to buy soybeans for animal feed and other uses.

A major concern, the report authors said, is the impact the trade dispute will have on a still-fragile global economy. It warned that "more countries may join the fray" by imposing their own tariffs and that "trade tensions could spiral into currency wars".

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