The Kiel Institute for the World Economy (IfW) has calculated in a study that the new trade agreement between the United States and China will primarily affect German manufacturers of vehicles, airplanes and industrial machinery – and cost them the equivalent of almost $ 4.5 billion in exports to the People’s Republic , Accordingly, German exporters are particularly under the agreement that has now entered into force because it redirects global trade. Only Brazil’s soy farmers are hit even harder.
–
On January 15, the United States and China signed a first partial agreement (“Phase 1 Deal”) to defuse their trade dispute, which has been in effect since the end of last week. China should also buy American goods to reduce the United States’ huge trade deficit.
“The trade agreement between the United States and China is questionable in several ways. The United States benefits unilaterally while China and third countries lose,” said Gabriel Felbermayr, President of the IfW. It violates the rules of the World Trade Organization (WTO) and leaves many questions unanswered, such as what happens if China does not meet its import obligations. “So the uncertainty about the future trade relations between the two countries remains very high. Also because the United States wants to take action against countries in the future that they believe manipulate their currency, which they have often accused of China,” continues Felbermayr.
–
In addition, the trade agreement will bring disadvantages for the Chinese, who unilaterally commit to importing US goods worth around $ 200 billion, thereby foregoing products from other countries that they previously preferred, said Felbermayr. “On the other hand, it has disadvantages for China’s other trading partners, whose imports are now being replaced by US products and who are losing market share in China to a considerable extent.”
Coronavirus could make things worse
The redirection effects, which are harmful to Germany and other countries, could be even greater if China’s economic growth turned out to be lower than expected – for example, as a result of the coronavirus epidemic. The reason for this is that the agreement commits China to a fixed additional import volume that does not depend on domestic demand.
–
The German economy sees the agreement with mixed feelings. “It is positive that a further global escalation in tariffs will be avoided for the time being,” said Eric Schweitzer, President of the German Chamber of Commerce and Industry (DIHK). “It is stressful that most of the punitive tariffs will remain in place.” So there is still a long way to go before there is any real relaxation in world trade. German companies are directly affected by the trade conflict through the international supply chains. “After all, the United States and China are our number one and third export markets,” said Schweitzer.
–
