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U.S. protectionism would have "significant knock-on effect" on many countries: report
BY 2018-10-19 07:39:01

PARIS, Oct. 18 (Xinhua) -- United States' economy policy based on higher customs duties and protectionist approach would have "significant knock-on effect on trade partners", whose added-value sales abroad would suffer a setback, warned Coface, France-based Insurance company for foreign trade, on Thursday.

In its report, the insurer credit noted that the election of Donald Trump was "a turning point in the country's trade policies" marked by a sharp increase in imports tariffs.

"Increased protectionism, triggered by the recent rise in U.S. customs duties, is giving rise to concern that many of the countries involved in production chains will be impacted by knock-on effects," the group said.

For the 2016-2018 period, Washington had more than doubled customs duties from 5.4 percent to 12.5 percent, it added, noting that 1 percent rise in U.S. import tariffs leads to an average fall of 0.5 percent in exports from targeted partner countries.

In addition to the direct effects, U.S. protectionism had also indirect negative impacts on the value-added exports.

"A 1 percentage point rise in U.S. tariff barriers, to any given country, results in a 0.46 percent decline in value-added exports from a partner country to the country targeted by the customs duties," Coface said.

It noted that indirect impacts were particularly prevalent in the transport sector, including the automobile industry which could suffer an average fall of 4.4 percent in the targeted countries if the United States increased by 1 percentage point tariffs on transport sector.

The machinery, mining and paper-wood sectors would also be impacted with declines. Meanwhile, the indirect impacts were lower for food products and relatively insignificant for metals, chemicals and agricultural products, according to Coface.

"The indirect effects on the value-added exports of partners that trade with the countries targeted by U.S. tariffs are significant, although, unsurprisingly, lower than the direct impacts," commented Julien Marcilly, Coface Chief Economist.

"This can be explained by the fact that partner countries may redirect some of their exports to other U.S. supplier countries that are not affected by tariff barriers. This would make it possible for partner countries to mitigate the contagion effect on intermediate goods exported by partner countries," he added. 

(Editor:Li Zhaoqi) (From:xinhua)
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