So far, Donald Trump’s trade war has not derailed the global economy

A YEAR AFTER the start of trade skirmishes between America and China, America’s economy—and the world’s—seem to be holding up. Are trade wars, as President Donald Trump believes, not so costly after all?

The immediate impact was always going to be hard to spot. Though special tariffs now cover more than half of China’s exports to America, those exports account for less than 2% of American personal consumption and only around 5% of American business investment. Surveys suggest that tariffs are suppressing investment in America, but how much is unclear.

As with all taxes, much of the effect is to shuffle costs and resources around. Taxing imports hurts companies and consumers by making their foreign purchases more expensive, and as domestic producers respond to weaker foreign competition by raising prices. Exporters may lose out from retaliatory tariffs. But there are also winners, including domestic companies shielded from foreign competition and thus able to enjoy fatter profits—and the US Treasury, which gains new revenues.

A recent study by Pablo Fajgelbaum of the University of California, Los Angeles, Pinelopi Goldberg of the World Bank, Patrick Kennedy of the University of California, Berkeley and Amit Khandelwal of Columbia University totted up all such effects for the tariffs imposed by the Trump...

via The Economist: Finance and economics Business Feeds

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