The U.S.-China Trade War is providing a laboratory for social scientists, economists and statisticians generating volumes of data that’ll be studied for decades (centuries?) to come.
The paper highlighted today is just one of what will be thousands of works to come and because of its proximity to events is incomplete and flawed. However, it’s the first attempt to fix a bead on how the trade war is affecting companies outside of both China and the U.S. and the author, Felipe Benguria of the University of Kentucky, admits its shortcomings but reckons we can see some broad trends without getting too bogged down in the precision of effect or measurement at this stage.
By analyzing quarterly data from public companies in 40-markets some clarity emerges. Videlicet?
1) companies suffering most from the trade war are those that supply either intermediate inputs or capital goods to China.
2) firms benefiting are those outside the U.S. that operate in industries protected by U.S. tariffs.
3) there are no signs of firms benefiting from Chinese tariffs.
4) the negative effects of the trade war are being felt most by smaller firms.
5) where lower profits are noted the root cause is revenue loss not cost pressure.
6) there is unequivocal evidence that firms with business exposed to China are reducing their investment/capital stock [My two-pennyworth; and this will have multi-month/year negative consequences for them].
The broad conclusion is that China and it’s supply complex are hurting and this hurt will persist even after the trade war concludes. The U.S. and companies in it’s close economic orbit are however less (but not not) affected.
You can access the paper in full via the following link The Global Impact of the U.S.-China Trade War.
Happy Sunday.