Who benefits the most from the newest US trade regulations and Washington-Beijing trade war?

The new trade regulations, which are expected to be set by US president Donald Trump is widely discussed by economists all over the world. The crucial threat for global economic order is announced 10% tariffs on 200$ million Chinese goods, which are expected to increase to 25% in January.1 The Chinese president, Xi Jinping, answered with tariffs for $110 million of US goods. The White House economic advisor, Larry Kudlow, announced in CNBC that Trump hasn’t ordered a preparation of a new trade agreement with China. The speculations, that the trade agreement between Washington and Beijing might be fully rejected spread.

According to Linda Yuehrade (The Guardian)1, trade barriers would not only damage both countries’ economy but also disorganize supply chains on the global level, raising prices for consumers worldwide. The worst-case scenario says that disruption of supply chains will have a long-lasting impact on a word trade, many companies will face the necessity of factories and distribution centers relocation. Decisions on the investment level impact employment and cause tax rises, which are much more difficult to reverse than tariffs.

The question worth asking is: who, if anybody, might benefit from the end of US-China trade relations. The EU/Canadian/Chinese/South American companies will search for other markets to fill the void created by the US. The candidate to get a benefit from this situation is Brazil, who might become the main (if not the only) soybean exporter to China1. In 2017 Brazil shipped over 50 million tons of soybeans to China, which is 40% of its total exports to this country. The Chinese demand for Brazilian soybean has raised by 300% in the last eight years. Moreover, Brazil, increasing the export, has an opportunity to improve the transport efficiency and reduce its costs. The other South American countries – Paraguay and Uruguay might become additional Chinese soybean suppliers.

Other players, who are said to be potential beneficiary of the US-Chinese trade war are Asian countries, such as Thailand and Malaysia, who are expected to fill the Chinese demand for auto parts manufacturing and imports.

European agriculture exports to China are foreseen to lift in order to replace goods supplied from the US. Beijing sees EU as an important strategic partner in WTO, so the negotiations with Brussels in the subject of trade agreement are expected to become more advanced. The main interest of Europe is opening the Chinese market to more sectors to prevent EU investments from falling down, as it happened in the years due to difficulties and restrictions on this market.

The challenging area would be setting regulations for global companies, such as Apple, which invest in both China and the US. Another uncertainty is the future of flagship Chinese strategy, the Made in China 2025 plan, which was aimed to make China competitive global manufacturer by artificial intelligence and automation development. The US set the intellectual property rights protection, which blocks a transfer of technologies to Beijing. In fact, as experts unofficially say, blocking China from developing the manufacturing might be the main reason for the whole confusion with trade agreements.