(May 20): US President Donald Trump raised tariffs on US$200 billion ($273.9 billion) worth of Chinese goods earlier this month and threatened to slap duties on all its exports to the US. About 1% of global economic activity is at stake in goods and services traded between the two countries. Using 2015 data from the Organisation for Economic Co-operation and Development (OECD), we calculate which countries are most exposed to these trade flows and, within each country, which industries are most at risk.
Overall, 3.8% of Chinese output is exported to the US, with Chinese manufacturers by far the most exposed. In 2015, 6.7% of China’s manufacturing production was exported to the US, rising to 12% for the manufacture of computers, electronics and electrical equipment and 13% for the textile industry.
The hit to Chinese manufacturing would extend to partners along the supply chain, particularly across Asia’s electronics industry. US exports to China are more limited and represent a smaller share of the US economy — with 1.2% of US output exported to China. Still, 5.1% of US agricultural production and 3.3% of manufacturing output ended up in exports to China. Spillovers to other countries are very small.
OECD’s Trade in Value Added (TiVA) database estimates that China exported US$489 billion worth of goods and services to the US in 2015, of which US$443 billion was exported by manufacturing industries — especially by the computer, electronics and electrical equipment industries. But Chinese exporters to the US are only one contributor to an often lengthy supply chain. Before the exporter sends a product to the US, several other industries across many countries will have contributed directly or indirectly to its production.
In 2015, 82% of the value of Chinese exports to the US originated from China, with various industries contributing. About half of Chinese value added embedded in exports to the US came from the manufacturing industry, a third from business services including transport and distribution services and the rest from the production of primary products, such as agriculture and mining. Foreign inputs came mainly from Asian manu-facturers, with South Korea, Taiwan and Japan making the largest contributions, alongside the US itself and, to a lesser extent, Germany. For some countries, especially across the Asian manufacturing supply chain, contributions to Chinese exports to the US made up a large share of overall activity. This was particularly the case for manufacturing of computers, electronics and electrical equipment.
In contrast, global exposure to US exports to China is much more limited. This reflects the smaller scale of these flows, as well as the lower share of foreign value added embedded into them.
OECD estimates that US exports to China were worth US$238 billion in 2015, with goods producers, including agriculture and utilities, accounting for about 60%. Roughly 90% of the value of US exports to China in 2015 originated from the US, with China the largest foreign contributor (2% of the overall value), followed by Canada (1.3%, primarily from mining) and Mexico.
Exposure from individual sectors outside the US was very limited. In the US, a few industries appeared particularly vulnerable, most notably agriculture and electronics, with 5% of their overall output in 2015 ending up in US exports to China.
About 1% of all the value produced globally feeds into the goods and services traded between China and the US. This output would be unlikely to dry up in the event of a further escalation in the trade war. But higher tariffs would mean lower margins for producers and higher prices for consumers and, in turn, reduced demand. This would create widespread disruption along the supply chain. While some of China’s partners might end up benefiting from the displacement of US demand away from China in the long term, the initial impact would be negative while supply chains adjust.
