Trade War can be expensive for the USA

Study reveals that Trump’s rates on China can damage the US economy more than official data suggest, expanding commercial uncertainties

New research suggests that the latest tariffs imposed by President Donald Trump on China imports may affect the US economy more than official US trade data indicate. According to Bloomberg, the impact, according to a study by New York Federal Reserve Bank economists, will be especially severe if the Trump administration ends the favorable treatment given to so -called “minimis” imports – those of less than $ 800.

Also read: Is the Chinese economy much bigger than they say?

“China’s US imports have decreased much less than it was reported in US official statistics,” wrote Hunter L. Clark, a New York Fed researcher, in a post published on Wednesday. “As a result, the recent increase in tariffs on China may have a greater impact on the American economy than the US official data suggests on the participation of Chinese imports.”

There is no doubt that the stricter treatment given to Chinese products during the first Trump government, much of which was maintained by the Biden government, reduced China’s participation in US imports. But how much? The answer varies depending on which country you choose to believe.

US data show that imports from China fell to 13.4% of total imports by 2024, compared to 21.6% in 2018. In nominal terms, they fell $ 66 billion to $ 439 billion during this period.

China’s data tell a different story. They show that “exports such as participation in the US import market have only 2.5 percentage points fell, less than a third of the fall shown in US data,” according to the post. Chinese data also indicates that the nominal value of exports increased US $ 91.2 billion to US $ 524 billion.

“Simply put, the US is saying they buy much less from China than China claims to be selling,” Clark wrote.

Thus, the impact of new tariffs can be greater than expected.

Minimis exemption

The impact will be amplified if Trump eliminates the exemption limit for direct imports to the consumer. This limit was increased from $ 200 to $ 800 in 2016, contributing to an “explosive growth” in these requests, which probably explains much of the discrepancy between US and China statistics, according to Clark.

Since returning to the White House in January, Trump has imposed a new 10% rate on Chinese products. He also announced, and then postponed, a plan to end tariff exemptions for China and Hong Kong’s “minimis” goods less than $ 800.

These smaller imports from China to the US are difficult to measure, but they are growing rapidly. China’s numbers conflict with Congressional Research Service estimates, but both sources suggest that the volume has shot.

“It seems highly plausible that China’s US minimis imports increased at least 50%, or even double, and have exceeded $ 50 billion last year,” Clark wrote. “This suggests that US consumers may face higher consequences than they appear with the recent increase of 10 percentage points in tariffs if the exception of minimis is eliminated to China and Chinese sellers do not reduce their profit margins by cutting export prices.”