What Would Happen in a US-China Trade War?

LOS ANGELES—A change in tone from the new administration has triggered concerns of a potential US-China trade war. Naturally, it was addressed at the recent Pulse of the Ports conference this week, when economist Mario O. Moreno, a senior economist of IHS Maritime and Trade. Although Moreno said that a war between the two countries was unlikely, he said that both have a lot to lose.

“Punitive tariffs would certainly harm US consumers, especially low-income and middle-income families through higher prices,” said Moreno in his economic address. However, it isn't only the US that would be impacted by higher tariffs, he said, explaining that China would suffer greater costs. “We have a little to lose and they have a lot to lose if we decide to impose tariffs on Chinese imports,” he said. “The fact of the matter is that in terms of balance of trade alone, by that I mean dollar value trade, the cost to China would be much greater than the US.

However, the ports often measure growth in terms of cargo volumes rather than costs. Both countries deliver a similar percentage of total exports to each other. In 2015, roughly 24% of China's TEU exports were shipped to the US, and that same year, the US shipped 24% of its total exports to China. “In terms of TEU volume trade, which is what we care about, it seems that the cause would be roughly equal to both countries,” he says. “The bottom line is that a trade war between the two countries is unlikely as both countries have a lot to lose.”

Additionally, while China would be significantly impacted by a rise in tariffs, we should expect China to invoke similar tariffs in retaliation. “China would not stay still. They would most likely retaliate by imposing tariffs of their own on US exports,” he adds.

The West Coast, and California specifically, hold the largest ports in the nation and are considered gateway markets from Chinese goods. As such, the West Coast will be impacted the most by a trade war. “You should care because West Coast ports exposure to Chinese imports is too great,” says Moreno. “West Coast ports on average handle 68% of the total in bound TEU traffic from China. In my view, a trade war with China would hurt West Coast ports the more than it would East Coast Ports or Gulf Coast ports.”

LOS ANGELES—A change in tone from the new administration has triggered concerns of a potential US-China trade war. Naturally, it was addressed at the recent Pulse of the Ports conference this week, when economist Mario O. Moreno, a senior economist of IHS Maritime and Trade. Although Moreno said that a war between the two countries was unlikely, he said that both have a lot to lose.

“Punitive tariffs would certainly harm US consumers, especially low-income and middle-income families through higher prices,” said Moreno in his economic address. However, it isn't only the US that would be impacted by higher tariffs, he said, explaining that China would suffer greater costs. “We have a little to lose and they have a lot to lose if we decide to impose tariffs on Chinese imports,” he said. “The fact of the matter is that in terms of balance of trade alone, by that I mean dollar value trade, the cost to China would be much greater than the US.

However, the ports often measure growth in terms of cargo volumes rather than costs. Both countries deliver a similar percentage of total exports to each other. In 2015, roughly 24% of China's TEU exports were shipped to the US, and that same year, the US shipped 24% of its total exports to China. “In terms of TEU volume trade, which is what we care about, it seems that the cause would be roughly equal to both countries,” he says. “The bottom line is that a trade war between the two countries is unlikely as both countries have a lot to lose.”

Additionally, while China would be significantly impacted by a rise in tariffs, we should expect China to invoke similar tariffs in retaliation. “China would not stay still. They would most likely retaliate by imposing tariffs of their own on US exports,” he adds.

The West Coast, and California specifically, hold the largest ports in the nation and are considered gateway markets from Chinese goods. As such, the West Coast will be impacted the most by a trade war. “You should care because West Coast ports exposure to Chinese imports is too great,” says Moreno. “West Coast ports on average handle 68% of the total in bound TEU traffic from China. In my view, a trade war with China would hurt West Coast ports the more than it would East Coast Ports or Gulf Coast ports.”