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Simon J. Evenett and Fernando Martín | 11 Nov 2024

Should the next US Administration raise sharply import tariffs on Chinese goods then there is a risk that some Chinese shipments will be deflected to other economies. Voices inside Europe call for pre-emptive increases in import tariffs to forestall such trade deflection. This briefing identifies and scales trade deflection of Chinese products to Europe during the first US-China Trade War. American tariffs can also cause trade retrenchment, where lost sales in the US market cause Chinese firms to benefit from fewer economies of scale and so retreat from EU markets. We show that both effects influenced Chinese exports to the EU during 2018 and 2019. However, the products involved were concentrated in a small number of HS chapters and, as far as the amounts of trade involved, largely offset each other. For the EU the ripple effects of this Trade War were contained.

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