The tariffs imposed by president Donald Trump and his Chinese counterpart Xi Jinping have hit firms in their own countries almost as much as the ones they were aiming at, according to research that shows the trade war has partly backfired on both nations.
Academics scrutinised stock market responses in order the gain a real-time assessment of the impact of the trade war that was harder to retrieve from economic data that were often out of date or affected by other events.
Since February 2018, the US has slapped tariffs on $550bn (£420bn) worth of Chinese products. China, in turn, has set tariffs on $185bn (£140bn) worth of US goods.
Peter Egger a professor at ETH-Zurich university and Jiaqing Zhu at Guangdong University of Foreign Studies, found that while the trade war tariffs of the US and China directly hurt targeted firms and sectors abroad as intended, they indirectly affect stock prices through global value chain linkages in the US, China, and in third economies which do not directly participate in the trade war.
The research, published on the economic portal VoxEU, found that US tariffs boosted share prices of some American companies by up to 7 per cent but cut the value of others by up to 2 per cent. While some Chinese firms share prices were hit, others gained. Looking at China, tariffs imposed by Beijing had a similar negative impact on domestic firms as well as hitting US companies.
1/12 Future product placement will be ‘tailored to individual viewers’
Marketing executives say that product placement in films and televison shows on streaming services such as Netflix may be tailored to individuals in future. For instance, if data shows that a viewer is a fan of pepsi, a billboard in the background of a shot would host an advert for pepsi, while for a viewer known to have different tastes it could be for Coca-Cola
Paramount
2/12 Corbyn wishes Amazon a happy birthday
In a card sent to Amazon CEO Jeff Bezos on the company’s 25th birthday, Labour leader Jeremy Corbyn writes: “You owe the British people millions in taxes that pay for the public services that we all rely on. Please pay your fair share”
3/12 No deal, no tariffs
The government has announced that it would slash almost all tariffs in the event of a no-deal Brexit. Notable exceptions include cars and meat, which will see tariffs in place to protect British farmers
Getty
4/12 Fingerprint payment
NatWest is trialling a new bank card that will allow people to touch their hand to the card when paying rather than typing in a PIN number. The card will work by recognising the user’s fingerprint
NatWest/PA Wire
5/12 Mahabis bust
High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
Mahabis
6/12 Costa Cola
Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA
7/12 RIP Payday Loans
A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA
8/12 Musk irks investors and directors
Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty
9/12 Jaguar warning
Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty
10/12 Spotif-IPO
Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty
11/12 French blue passports
The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.
The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.
12/12 Beast from the east economic impact
The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.
1/12 Future product placement will be ‘tailored to individual viewers’
Marketing executives say that product placement in films and televison shows on streaming services such as Netflix may be tailored to individuals in future. For instance, if data shows that a viewer is a fan of pepsi, a billboard in the background of a shot would host an advert for pepsi, while for a viewer known to have different tastes it could be for Coca-Cola
Paramount
2/12 Corbyn wishes Amazon a happy birthday
In a card sent to Amazon CEO Jeff Bezos on the company’s 25th birthday, Labour leader Jeremy Corbyn writes: “You owe the British people millions in taxes that pay for the public services that we all rely on. Please pay your fair share”
3/12 No deal, no tariffs
The government has announced that it would slash almost all tariffs in the event of a no-deal Brexit. Notable exceptions include cars and meat, which will see tariffs in place to protect British farmers
Getty
4/12 Fingerprint payment
NatWest is trialling a new bank card that will allow people to touch their hand to the card when paying rather than typing in a PIN number. The card will work by recognising the user’s fingerprint
NatWest/PA Wire
5/12 Mahabis bust
High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
Mahabis
6/12 Costa Cola
Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA
7/12 RIP Payday Loans
A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA
8/12 Musk irks investors and directors
Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty
9/12 Jaguar warning
Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty
10/12 Spotif-IPO
Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty
11/12 French blue passports
The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.
The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.
12/12 Beast from the east economic impact
The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.
Because of the way that modern supply chains extend cross borders, the business activities of virtually all sectors and countries are linked to each other, which meant that other countries’ firms suffered indirect impacts.
“Our analysis shows that there are unintended effects of the trade war on the US and China, as well as on third parties, mediated by global value chain interdependencies,” they said.
“The results suggest that there is an irony to the US-China trade war in that it appears to have resulted partly in the exact opposite of what was intended. Instituting well-targeted protectionist tariffs in such a world is not easy and eventually, as in the example of the US-China trade war, hurts those they are meant to protect.”
The authors said that as with Brexit, stock market investors were much more concerned about the economic turmoil that protectionist policy announcements might trigger than the politicians proposing them appeared to be.
Mr Egger and Mr Jiaqing added that slapping a tariff on the products of a sector was equivalent to raising the price for these products for domestic buyers.
Their findings echoed research for NBER, the US think tank, that showed this week that US tariffs continues to be almost entirely borne by American firms and consumers.
Just before the end of 2019, research by the US Federal Reserve found that Trump’s tariffs had led to job losses in the manufacturing sector and higher prices for producers and consumers.
Figures earlier this month showed that activity in the US manufacturing sector contracted in December 2019 for the fifth month in a row, falling to its weakest level in more than 10 years.
