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Economists Run Numbers on Spillovers From Trump's China Threat

(Bloomberg) -- As the world awaits details on which Chinese products and industries the U.S. will target with tariffs, economists have run the numbers on the possible fallout.

Here’s a sample of the analysis:

Nomura

The Japanese bank calculated foreign value added in China’s gross exports and tracked it back to the source. That showed that the biggest contributors of value add to China’s exports are all Asian, led by Taiwan, Malaysia, South Korea, Hong Kong and then Singapore. Nomura Holdings Inc. estimates one-third of China’s gross exports contains foreign value added, a very large share for such a major economy.

“The bigger losers could be other smaller and more trade-oriented Asian economies that are big suppliers to China of high value-added parts and components that are used in China to produce the finished product,” according to Rob Subbaraman, head of emerging market economics at Nomura in Singapore.

Goldman Sachs

A $50 billion decline in Chinese tech exports to the U.S. would trigger losses for China of about $150 billion in gross output terms, or 0.4 percent of GDP in value added terms, Goldman Sachs Group Inc. analysts wrote in a March 24 report. Losses for the rest of Asia would come to about $10 billion, mostly in South Korea and Taiwan.

Economists led by Andrew Tilton said the spillover impact on Asia “would be only half compared to that of a decade ago as the regional supply chain has meanwhile weakened through geographic diversification by Asian exporters and China’s policy drive for import substitution.”

Moody’s

Moody’s Investors Service warned that broad U.S. protectionist measures would dent credit profiles of Asian sovereigns and manufacturers. Much of that exposure is because of the region’s key role in China’s supply chain.

“A greater emphasis on bilateral -- rather than multilateral -- trading arrangements would be credit negative for Asia’s economies, in view of the benefits to the region from an open, rules-based regime of international trade,” Moody’s analysts said.

Bloomberg Economics

The impact of U.S. tariffs on Chinese exports will be dispersed because of its global supply chains, according to Bloomberg Economics Chief Asia Economist, Tom Orlik.

“To take the familiar example of the iPhone, the impact of tariffs would be spread between South Korean, Japanese and Taiwan suppliers, Chinese assemblers, and the U.S. owners of the brand and intellectual property,” Orlik wrote in a recent report.

©2018 Bloomberg L.P.

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