Global Trade Tensions Escalate: Average Effective Tariff Rate Hits New High

In a significant development, the average effective tariff rate has increased globally, despite President Trump's recent decision to lift tariffs on certain Chinese goods. The latest data from various trade organizations and governments reveals that China's tariff rate has skyrocketed to 145 percent, making it one of the highest in the world.

The Impact of Tariffs on Global Trade

Tariffs are a type of tax imposed by governments on imported goods or services. They can significantly impact global trade patterns, influencing the prices of products, supply chains, and economic growth. The effective tariff rate is the percentage of a product's value that is actually paid in tariffs.

Why Did China's Tariff Rate Increase So Significantly?

China's rapid rise to becoming the world's second-largest economy has led to increased tensions with other countries, including the United States. Trade wars and protectionist policies have become a regular feature of international trade relations in recent years.

The latest surge in tariffs is largely attributed to the ongoing trade tensions between China and the US. In 2018, the US imposed tariffs on $34 billion worth of Chinese goods in response to what it claimed were unfair trading practices by Beijing. China retaliated with its own tariffs, targeting a range of American products from soybeans to whiskey.

Since then, both countries have continued to escalate their trade tensions, imposing new tariffs and increasing existing ones. The latest round of tariffs saw the US impose duties on $200 billion worth of Chinese goods in 2019, prompting China to retaliate with its own tariffs on $60 billion worth of American products.

How Has the Average Effective Tariff Rate Increased?

Despite President Trump's reversal on some tariffs, the average effective tariff rate has increased globally. According to data from the World Trade Organization (WTO), the average effective tariff rate worldwide rose to 2.5 percent in 2020, up from 2.3 percent in 2019.

In Europe, the average effective tariff rate jumped to 1.8 percent in 2020, a significant increase from 1.4 percent in 2019. The tariffs imposed by the European Union on Chinese goods account for much of this increase.

What Are the Consequences of Rising Tariffs?

Rising tariffs have far-reaching consequences for businesses and consumers alike. Some of the key effects include:

• Higher Prices: Tariffs can lead to higher prices for products, as companies pass the cost of tariffs on to consumers.
• Reduced Trade: Tariffs can reduce trade between countries, leading to economic losses for both importing and exporting countries.
• Supply Chain Disruptions: Tariffs can disrupt supply chains, as companies may be forced to find alternative suppliers or delay production.

What's Next?

As global trade tensions continue to escalate, it remains to be seen whether the average effective tariff rate will continue to rise. One thing is certain: the consequences of rising tariffs will be far-reaching and have a significant impact on businesses and consumers worldwide.

Conclusion

The rise in the average effective tariff rate is a worrying trend for global trade. Despite President Trump's reversal, China's tariff rate has skyrocketed to 145 percent, making it one of the highest in the world. As tensions between countries continue to escalate, it's essential to consider the consequences of rising tariffs and work towards finding solutions that promote free and fair trade.

Additional Statistics

• Global Tariff Rate: The global average effective tariff rate has increased by 0.2 percentage points since 2019.
• US Tariffs on China: The US has imposed tariffs on $200 billion worth of Chinese goods, with an average tariff rate of 7.5 percent.
• China's Tariffs on the US: China has retaliated with tariffs on $60 billion worth of American products, with an average tariff rate of 10.8 percent.

Sources

• World Trade Organization (WTO)
• European Union
• United States International Trade Commission (USITC)