Nigel Driffield, Professor of International Business at Warwick Business School, said:

“A trade war between the two biggest economies on the planet could obviously have huge consequences for both sides.

“But no-one really knows what a “trade war” looks like when one side has long value chains and integrated production systems. For example, when Trump puts tariffs on Chinese exports to the US, some of these products will be inputs into US supply chains, or other US business activities. All this does is increase cost to US firms and consumers.

“The aim of this form of trade policy is to encourage trade substitution, i.e. for US firms to stop buying Chinese goods, and buy US ones. However, it is just as likely that all it will do is increase the price of those imports, or alternatively encourage US importers to buy from Vietnam or south America, at potentially higher cost. It is not clear who will be the “winners and losers” here, except for the fact that US consumers will not be winners.”

14 May 2019

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