Currency wars, widespread protectionism and billion-dollar losses could arise if the U.S. and China fail to
settle their trade differences before March 1, the UN warned in a new study. Published by the UN
Conference on Trade and Development (UNCTAD) on Monday, the report said that while some countries
would see a surge in exports, negative global effects were likely to dominate. China and the U.S. have been
embroiled in a trade dispute since early 2018. In September, the U.S. added 10 percent tariffs on around
$200 billion of Chinese imports, and it planned to increase those rates to 25 percent in January. However,
both parties agreed to freeze these increases until March 1 while they engaged in talks. According to the UN
report, continuing or hiking tariffs between the two superpowers would have an unavoidable impact on the
“still fragile” global economy, including disturbances in commodities, financial markets and currencies. “One
major concern is the risk that trade tensions could spiral into currency wars, making dollar-denominated
debt more difficult to service,” UNCTAD’s report said. “Another worry is that more countries may join the
fray and that protectionist policies could escalate to a global level.” A currency war occurs when nations
deliberately depreciate the value of their domestic currencies in order to stimulate their economies. The
report’s authors noted that protectionist policies generally hurt weaker economies the most, while tit-for-
tat moves of the trade giants would have a domino effect beyond their domestic markets. “Tariff increases
penalize not only the assembler of a product, but also suppliers along the chain,” the report noted. Chinese
exports affected by U.S. tariffs would likely hit east Asian value chains the hardest, UNCTAD said, with an
estimated contraction of around $160 billion. Of the total $250 billion in Chinese products currently subject
to U.S. tariffs, around 82 percent will instead be exported by firms in other countries, the study estimated.
While 12 percent was estimated to be retained by Chinese companies, only 6 percent would be captured by
domestic U.S. firms. Meanwhile, of the U.S. exports subject to Chinese tariffs, about 85 percent would be
captured by outside markets, UNCTAD estimated. The report said U.S. firms would likely retain less than 10
percent of those exports, while Chinese businesses would capture around 5 percent. The countries
expected to benefit the most were those that had the economic capacity to replace U.S. and Chinese firms.
EU exports would capture $70 billion of U.S.-China bilateral trade, the report estimated, while Japan,
Mexico and Canada would each gain around $20 billion. The countries expected to see the highest
percentage increase to their current total exports were Australia, Brazil and India. “Because of the size of
their economies, the tariffs imposed by Unites States and China will inevitably have significant repercussions
on international trade,” Pamela Coke-Hamilton, head of UNCTAD’s international trade division, said at a
press conference on Monday. “While bilateral tariffs are not very effective in protecting domestic firms, they
