Global trade may fall 50% if US and China fail to resolve tariff issues

London – 20 September 2018 – Global trade growth could halve by 2020 should the US and China fail to agree a deal to halt the increase in import tariffs, according to leading trade credit insurer Euler Hermes.

The US has implemented a 10% tariff on $200bn of Chinese imports. China has retaliated with tariffs on $60bn of goods starting later this month.

US tariffs on Chinese goods could increase to 25% should the two countries fail to agree a deal before 2019. Euler Hermes predicts that global trade growth could decelerate from roughly 4% y/y to 2% y/y by 2020 in this ‘trade feud’ scenario.

The average US import tariff now stands at 5.2%, the highest level since the 1980s and compares to an average of 3.5% before the latest tariffs were imposed.

Ludovic Subran, Chief Economist at Euler Hermes, said:

“While the phrase ‘trade war’ has been used, we see the current situation as more of a ‘trade feud’”.

“In our view a ‘trade war’ scenario would involve tariffs on $500bn worth of Chinese goods. This, in turn would lead to a six percentage point cut in global trade and 1.5 percentage cut in global GDP growth. However, we only see a five per cent chance of this situation coming about, given how detrimental its impact will be on the global economy.”

“Encouragingly, global trade is actually doing well after rising by around five per cent last year. For the moment, it is outweighing the dampening effects of new protectionism measures by the world’s largest economies. But we may see an increase in payment risk across the globe if further tariff increases are imposed.”


Media contacts:

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Adrian Russell
+44 (0)20 7860 2728

Callum Brown
0161 235 0361