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Escalation of US-China bilateral tariffs to shave off $1 trillion from America’s GDP

Escalation of US-China bilateral tariffs to shave off $1 trillion from America’s GDP
A study by the US Chamber of Commerce shows how the deterioration in the trade dispute between the world’s two largest economies, China and the United States, will drastically affect the American economy.

“Escalation of bilateral tariffs results in lower GDP, lower employment, lower investment, and lower trade flows for the United States,” said the study, which was conducted jointly by the commerce chamber and research firm Rhodium Group.

It found that tariff measures would cost the US GDP from $45 billion to $60 billion in the first year following the imposition. The figure will grow to $89 - $125 billion annually, five years later.

The US economy stands to lose $1 trillion of its baseline potential within ten years of tariff implementation, the report concluded.

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Tariffs are also expected to “shave up to one-third of a percentage point” in total factor productivity from real US GDP growth, “threatening a key channel for transmission of the benefits of an open ICT (information and communications technology) sector to the economy.”

Industries like ICT manufacturing are built on globalized trade and production networks, and “are most exposed to negative impacts,” according to the report.

Due to the tariffs, US ICT goods exports will decrease by between 14.2 percent and 20 percent in the five years ahead. The country's ICT imports will drop by nine percent to ten percent during the same period.

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“Because both the United States and China are highly integrated into global value chains – and are the most integrated in ICT industries – they stand to lose the most in investment, trade, and welfare from the imposition of bilateral tariffs,” said the report.

The research also predicted global growth to be $151.4 billion, or 0.2 percent, lower than projected in 2025 if Washington’s tariffs on Chinese exports are increased to 25 percent and Beijing retaliates.

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