If tariffs on all goods traded between the two countries were raised to 25%, manufacturing in the United States and China would suffer a "huge" loss, as capacity would shift to Mexico, Canada and East Asia.
This will intensify the tit-for-tat tariff dispute between the two economic giants. Since mid-2018, the tariff dispute has been hovering over global financial markets. The United States has imposed a 25% tariff on Chinese goods worth $50 billion and a 10% tariff on another $200 billion. In retaliation, China imposed tariffs on American products, including major crops.
The two countries have been trying to negotiate an agreement to end the dispute. U.S. Trade Representative Lethizer and Treasury Secretary Nuchin are scheduled to resume talks with Vice Premier Liu He of the State Council on Wednesday. Just a few days ago, the two sides announced that progress had been made in the talks held in Beijing last week.
The IMF report shows that if the trade war escalates, China's electronics and other manufacturing industries will be severely damaged, and American agriculture will shrink dramatically.
The Organization predicts that "large industries in both countries will lose a lot of jobs".
This means that jobs in the U.S. agricultural and transportation equipment industries will be reduced by about 1%, and jobs in Chinese manufacturing industries, including furniture and jewelry, will be reduced by 5%.
Growth in both economies will lose momentum. IMF President Lagarde said Tuesday that the IMF had revised its analysis of the impact of the trade war between the United States and China, showing that if all trade between the two countries were subject to a 25% tariff, US gross domestic product (GDP) would be reduced by as much as 0.6% and China's GDP would be reduced by as much as 1.5%.
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