THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED TRADE TENSIONS BETWEEN THE UNITED STATES OF AMERICA AND CHINA: THEIR CAUSES AND EFFECTS ON ARAB ECONOMIES

by **claud39** Tue Feb 11, 2020 9:54 am

THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED TRADE TENSIONS BETWEEN THE UNITED STATES OF AMERICA AND CHINA: THEIR CAUSES AND EFFECTS ON ARAB ECONOMIES

2020-02-11

The Arab Monetary Fund publishes a study entitled

" Trade tensions between the United States and China :

Causes and effects on Arab economies "

Trade tensions between the United States of America and China are one of the most important major shifts

In the global trading system

Complex effects of trade tensions between the United States of America and China on Arab economies

The effect of trade tensions is transmitted to the Arab countries through three main channels

Thirteen Arab countries

A one percentage point decrease in the growth rate of the world and Chinese economy due to unfavorable effects

Trade tensions lead to a decrease in the growth rate of Arab economies by 0.57 and 0.30 percentage points, respectively

In the context of the efforts made by the Arab Monetary Fund in the field of research activities to support decision makers in Arab countries on priority issues, the Fund prepared a study entitled "Trade Tensions between the United States of America and China : Their Reasons and Effects on Arab Economies". The study focused on examining the causes of trade tensions between the two countries, their economic repercussions, and their expected repercussions on Arab economies.

The study indicated that the trade tensions that have arisen between the United States of America and China and some of its trade partners since 2018 have left fingerprints on Arab economies due to the growing globalization of Arab economies and increased levels of exposure to the global economy in general, and to both the American and Chinese economies in particular.

The study also confirmed that the challenges that Arab tensions leave as represented by the global economic slowdown as well as slow growth in the American and Chinese economies themselves, and the fluctuations in the financial and commodity markets, which could affect Arab exports, it may involve opportunities represented in the transformation Part of the trade between the two countries - America and China - to their trading partners, including the Arab countries, which requires the Arab countries to reconsider their economic and trade policies to deal positively with those effects.

The study issued by the Arab Monetary Fund expected that the unfavorable effects of trade tensions between the United States of America and China will be reflected in the economies of thirteen Arab countries in particular, including: Saudi Arabia, the United Arab Emirates, Oman, Qatar, Kuwait, Bahrain, Iraq, Algeria, Libya and Egypt , Morocco, Jordan, and Sudan through a number of transmission channels that are represented in the channel of external demand, international oil prices, and foreign direct investment flows.

Early global implications

The study started by noting that the trade tensions between the United States of America and China are one of the most important major transformation processes in the global trading system, as they quickly led to the perpetuation of uncertainty in the global economy and negatively affected the business climate and financial market confidence, and threatened the recovery that was expected in The global economy during 2019, due to the heavy weight of the American and Chinese economies in world trade (approximately 46 percent of global trade together).

Shifts in the global trade scene

The study indicated that the global trading system has undergone several transformations for decades, the most important of which is the trend towards commercial polarity, the change in the commodity structure of world trade, in addition to the change in the trade policies of the countries of the world. The study stated that the world has known three waves of trade policies represented in: (1) trade protectionism since the thirties of the last century, (2) the liberalization of world trade after the Second World War, especially after the formation of the Bretton Woods institutions in 1944, and the growing influence of globalization and the emergence of regional blocs And the establishment of the World Trade Organization (3) the emergence of new protectionism during the past two decades in light of the decline in popular support for globalization.

The return of trade protectionism

The study stated that trade wars are not new. Rather, it dates back to the 1930s, when the United States of America enacted the Customs Duties Law in 1930, which involved increasing customs duties in about nine hundred items of agricultural imports at a rate ranging between 40 and 48 per cent. Canada and countries decided European reciprocity, which precipitated the Great Depression, and then ignited the fuse of World War II in 1939. However, the pace of trade protectionism has increased significantly over the past two decades, especially with the escalation of discourse oriented to narrow national interests.

At the beginning of 2018, the United States of America launched a new chapter of trade tensions when it announced its policy of imposing customs duties on imports from China - in addition to other trade partners such as the European Union, Mexico and Canada - which amounted to $ 283 billion in increasing customs duties to reach between Between 10 and 50 percent, for these countries to raise tariffs on US imports valued at about $ 121 billion. In the wake of that, the United States of America decided in March of 2018 to impose customs duties at a rate of 25 percent on steel (valued at $ 50 billion), and 10 percent on aluminum imported from China. On the other hand, China announced its response by imposing corresponding fees on its imports from America.

Economic and non-economic reasons

The study noted that the US-China trade tensions have overlapping economic and non-economic approaches. Foremost among the economic reasons is the growing US trade deficit with China, which reached $ 378.6 billion in 2018 , accounting for 65 percent of the total US trade deficit. The United States also accuses Beijing of adopting a mixture of trade, industrial, and monetary policies that enhance the competitiveness of Chinese products in American (and global) markets, such as controlling the local currency (yuan), and practicing protectionist policies - such as subsidies and financial support provided to domestic exporters - and espionage Industrial property, theft of intellectual property rights, forced transfer of technology, and others.

The non - economic reasons is represented an escalation of the US approach to narrow national interests by raising the slogan of "America First" (America First) . The United States is betting, in its trade dispute with China, that the latter will not be able to withstand customs and non-tariff obstacles due to the dependence of Chinese exports on American markets, in the light of which (China) will be forced to sit at the negotiating table and accept the American conditions.

Paradox

The study indicated a paradox that the US trade deficit did not stop despite the protectionist policy applied by the United States of America with China and other trade partners, and the reason for this is that America continues to import from China and the rest of its partners as a result of the dependence of its economic growth model on imports to meet the needs of high domestic consumption, especially In light of the high price of the dollar in global markets in 2018, which led to a decrease in the cost of imports (from the point of view of the American importer).

Negotiations

The study stated that the effects of trade tensions on the economies of the two countries and on the global economy have led them to negotiate a solution to stop these escalating tensions between them. Most of these negotiations have not yet led to a complete end to the trade tension between the two countries, as they resulted in the December of 2019 in the commercial and economic "first stage" agreement, which includes a gradual abolition of fees, and China spending 50 billion dollars to buy US agricultural commodities. , Strengthen the protection of intellectual property rights, expand market access, and protect the rights of foreign companies in China .

Effects on the American and Chinese economies

The study confirmed that the economy of both America and China was affected by the trade tension between them, so American exports to China decreased from 12.4 billion dollars in March 2018 to 10.4 billion dollars in March 2019, registering a decline of 19 percent as a result of customs duties imposed by China on American imports Which is estimated to total 110 billion dollars. The prices of Chinese commodities also increased in the American market as a result of the imposition of customs duties imposed on them by American companies and borne by the American consumer. In this context, the losses incurred by American consumers and companies are estimated at 51 billion dollars, or about 0.27 per cent of US GDP, and the result is a decrease in real income in the United States of America by 1.4 billion dollars per month at the end of 2018.

As for the effects on the Chinese economy, it is represented by the decline in Chinese exports to the United States of America, which decreased from $ 52.2 billion in October 2018 to $ 31.2 billion in March 2019, a decrease of 40 percent within five months, not to mention the restrictions set by the administration American companies in front of Chinese companies have access to the US communications technology market.

Global implications

Trade tensions between the United States of America and China have affected the global economy and international trade through their impact on the overall demand for imports for each of them, and consequently the impact on the global economy, and have led to severe disturbances in global value chains, especially in products that are extensively entered into Trade between the two countries, such as technical equipment and cars, and on financial markets. These effects have led the central banks of the two countries and a number of countries to make changes in their monetary policies in an effort to reduce the risks of growth, towards more facilitation and expansion in order to reflect the deflationary pressures of trade tensions.

On the other hand, the effects of the said trade tensions are the shift of trade, that is, the change of intra-US trade trends to other partners of the two countries. For China, the loss of its exports to America has resulted in a shift in trade for Taiwan, Mexico, the European Union and Vietnam, with another part of its trade likely to shift to Africa. For the United States of America, the beneficiary of trade transformation is the European Union as well as Canada and Mexico. In the context of trade transformation, the net effect of the impact of trade tensions on global trade is the difference between the volume of global trade before and after trade transformation.

Assumptions

The study stated that despite the agreement of the first stage reached by the two parties in December 2019, the US-China trade tension remains interactive and its dimensions have not yet manifested, so there are three scenarios for the consequences of this tension on the global economy in general and the Arab in particular. The first (optimistic) assumption is that the two countries may reach a final agreement that puts an end to the trade dispute between them. The second assumption (caution) is that the two countries may reach a temporary compromise or truce that reduces trade tension between them but does not end it. The third (pessimistic) assumption is that both countries will stick to their positions without compromise, and thus the continuing and escalating pace of trade tensions between them, at least, until the date of the US elections on November 3, 2020.

Channels of transmission of monuments

The study indicated that there is a group of channels through which trade tensions can be transmitted over the Arab economies, focused on three main channels, namely external demand, international oil prices and foreign direct investment flows. In terms of the channel of external demand , the Arab countries are considered one of the largest geographical regions exposed to the global economy represented by the value of international trade to the gross domestic product, especially in light of the contribution of external demand by about 48 percent of the total total demand in the Arab countries. In addition, the United States of America and China are among the most important trading partners for the Arab countries, as the two markets absorb about a fifth of the total exports of Arab countries. Arab exports.

Arab saw exports to both China and the United States of America significant growth over the last decade as its value rose to about $ 185 billion on average annually during the period (2011- 2018 ) compared to 22 billion dollars , the annual average Arab exports to the two countries during the period (1995- 2000 ) Representing about nine times. It is noted in this regard that the relative importance of the Arab countries' exports to China is higher compared to their exports to the United States of America starting in 2009. For example, the exports of the Arab countries to China in 2018 accounted for 2.3 times their exports to the United States of America.

According to the external demand channel, the impact of trade tensions between the two global poles on Arab economies is expected to come as a result of two different effects in terms of direction. On the one hand, it is expected that these tensions and their possible repercussions on the growth rates of the United States of America and China will lead to a decrease in the levels of external demand of the two countries for the exports of the Arab countries, which would constitute an unfavorable impact on the economies of these countries. In this case, it is expected that nine Arab countries that are more exposed to the American and Chinese economies will be affected more by these tensions compared to other Arab countries, where exports of these countries to the American and Chinese markets constitute about 92 percent of the total Arab exports to these two countries.

On the other hand, the study expected that there will be a potential favorable impact of trade tensions on Arab countries as a result of the expected effect of "trade transformation" in light of the high tariffs imposed on intra-trade between the United States of America and China.

It is striking in this regard that the recorded increase in exports of Arab countries to both the American and Chinese markets in 2018 in particular is the year that witnessed the beginning of trade tensions, as Arab exports to the United States of America grew by 20 per cent, while Arab exports increased To the Chinese market by 47 percent in the same year, which may be attributed to the effect of the transfer resulting from the deepening of trade tensions between the two countries and the transition of a side of foreign trade between the two countries to the Arab countries, as happened similarly in Mexico, Argentina and other countries. For others that have benefited from these tensions.

As for the oil price channel, The increase in trade tensions undoubtedly leads to lower levels of demand for oil in light of the high levels of uncertainty and declining levels of investor and consumer confidence and thus the decline in world oil prices. In this context, trade tensions have resulted in slowing levels of the increase in oil demand from 1.5 million barrels per day in 2018 to 0.98 million barrels per day in 2019, according to OPEC estimates, and consequently, price levels decrease by nearly 10 percent in 2019. Accordingly, The persistence of trade tensions is reflected in the economies of the Arab oil-exporting countries in light of the high levels of dependence on oil, especially in eight Arab countries in particular. The contribution of the oil sector has between 30 to 50 percent of GDP, and between 67 to 89 Percent of total public revenue, and about 33 to 95 percent of total exports.

With regard to the potential impact of channel flows of foreign direct investment , it has resulted in the global financial crisis in 2008, and tensions between the United States and China, and return partial traditional policy of tracks cash in some developed economies in 2018, a decline in FDI flows to developing countries Low levels of investor confidence and uncertainties about public policies remained among the most important of trade policies. Like other developing countries, the Arab countries affected by these developments , where the average annual inflows of foreign direct investment fell to $ 49 billion annually on average during the period (1995- 2010 ) to $ 36 billion a year during the period (2011- 2018). These developments are expected to affect, in particular, the economies of eight Arab countries that receive about 93 percent of the total FDI inflows to Arab countries.

A model for measuring impacts

The study used a standard model to estimate the potential impact of the decline in the growth rate of the global economy, and the rate of growth of the American and Chinese economies, on Arab economies. This model is characterized by its ability to estimate the dynamic relationship between the variables involved.

The results of the model indicated that there is a direct relationship between the rate of growth of the global economy, the rate of growth of the Chinese economy and the rate of growth of Arab countries as a group at current prices. It showed that an unfavorable shock to global economic activity as a result of trade tensions by one percentage point will lead to a similar decline in the rate of growth of Arab economies as a group by about 0.57 percentage points.

The results of the model showed that the peak of the Arab economies being affected by any shock to global economic activity occurred during the two years immediately after the shock occurred, then Arab economies soon regained their balance again in the aftermath, while Arab economies record the peak of their vulnerability to any shock to the Chinese economy In the year immediately following the occurrence of the trauma, then the balance will be restored gradually from the third year to the trauma occurring.

The results of the model also indicated that a similar shock in the rate of growth of the Chinese economy as a result of trade tensions by about one percentage point leads to a decrease in the rate of growth of Arab economies by about 0.30 percentage points, which is explained in particular by the growing relative importance of economic relations between Arab countries and the Chinese economy compared to its American counterpart . Part of the impact of this relationship between the Arab and Chinese economies is due to the correlation between the rate of growth of the Chinese economy and the levels of oil demand, which is reflected in the levels of its prices in international markets and affects the economies of Arab countries, especially in light of the high relative importance of Arab oil exports To what constitutes about 81 percent of the total exports of group countries to China.

On the other hand, the change in the growth rate of the American economy does not necessarily entail a change in the rates of demand for Arab exports, especially oil ones, in light of the trend of the United States of America during the past decades to increase levels of self-reliance on local energy sources and reduce dependence on oil imports to shift from an importer Net to a net source of oil. This is expected to happen in 2022, according to the US Energy Information Agency.

Recommendations

The study presented some recommendations, the most important of which are: Arab countries to monitor developments of trade tension between the United States of America and China - and any trade tensions that occur between major international or regional countries - on an ongoing basis and measure their effects on their economies, and to share the results of these studies with planning centers and economic decision-making in countries Arabic.

The study also called for attention to increase levels of diversification of Arab economies, whether in terms of production or export structures and diversification in relation to trade and investment relations with various countries of the world, with a focus on the continuous improvement of levels of productivity and international competitiveness with the aim of increasing levels of their ability to face any external shocks.

The study also recommended the need to seize the potential opportunities for the trade dispute between the United States of America and China, which includes the relative transformation taking place from the intra-regional trade of the two countries to the Arab region through improving the business environment and investment climate and competition and improving the ease of doing business index, and restructuring the sectors associated with trade with China, especially in the framework of chains Global value and the Silk Road.

In conclusion, the study recommended continuing to strive towards enhancing Arab economic integration with its various components. In particular, it is necessary for Arab countries to also be involved in regional (Arab) value chains in addition to being involved in global value chains.

The full version of the study is available at this link

https://www.amf.org.ae/ar/content/%D8%A7%D9%84%D8%AA%D9%88%D8%AA%D8%B1%D8%A7%D8%AA-%D8%A7%D9%84%D8%AA%D8%AC%D8%A7%D8%B1%D9%8A%D8%A9-%D8%A8%D9%8A%D9%86-%D8%A7%D9%84%D9%88%D9%84%D8%A7%D9%8A%D8%A7%D8%AA-%D8%A7%D9%84%D9%85%D8%AA%D8%AD%D8%AF%D8%A9-%D8%A7%D9%84%D8%A3%D9%85%D8%B1%D9%8A%D9%83%D9%8A%D8%A9-%D9%88%D8%A7%D9%84%D8%B5%D9%8A%D9%86

/[term]/[language]/%D8%AF%D8%B1%D8%A7%D8%B3%D8%A9 %D8%A7%D9%84%D8%AA%D9%88%D8%AA%D8%B1%D8%A7%D8%AA %D8%A7%D9%84%D8%AA%D8%AC%D8%A7%D8%B1%D9%8A%D8%A9 %D8%A8%D9%8A%D9%86 %D8%A7%D9%84%D9%88%D9%84%D8%A7%D9%8A%D8%A7%D8%AA %D8%A7%D9%84%D9%85%D8%AA%D8%AD%D8%AF%D8%A9 %D8%A7%D9%84%D8%A3%D9%85%D8%B1%D9%8A%D9%83%D9%8A%D8%A9 %D9%88%D8%A7%D9%84%D8%B5%D9%8A%D9%86.pdf]https://www.amf.org.ae/sites/default/files/research_and_publications/%5Bvocab%5D/%5Bterm%5D/%5Blanguage%5D/%D8%AF%D8%B1%D8%A7%D8%B3%D8%A9%20%D8%A7%D9%84%D8%AA%D9%88%D8%AA%D8%B1%D8%A7%D8%AA%20%D8%A7%D9%84%D8%AA%D8%AC%D8%A7%D8%B1%D9%8A%D8%A9%20%D8%A8%D9%8A%D9%86%20%D8%A7%D9%84%D9%88%D9%84%D8%A7%D9%8A%D8%A7%D8%AA%20%D8%A7%D9%84%D9%85%D8%AA%D8%AD%D8%AF%D8%A9%20%D8%A7%D9%84%D8%A3%D9%85%D8%B1%D9%8A%D9%83%D9%8A%D8%A9%20%D9%88%D8%A7%D9%84%D8%B5%D9%8A%D9%86.pdf

https://www.amf.org.ae/ar/content/%D8%B5%D9%86%D8%AF%D9%88%D9%82-%D8%A7%D9%84%D9%86%D9%82%D8%AF-%D8%A7%D9%84%D8%B9%D8%B1%D8%A8%D9%8A-%D9%8A%D9%8F%D8%B5%D8%AF%D8%B1-%D8%AF%D8%B1%D8%A7%D8%B3%D8%A9-%D8%A8%D8%B9%D9%86%D9%88%D8%A7%D9%86-%D8%A7%D9%84%D8%AA%D9%88%D8%AA%D8%B1%D8%A7%D8%AA-%D8%A7%D9%84%D8%AA%D8%AC%D8%A7%D8%B1%D9%8A%D8%A9-%D8%A8%D9%8A%D9%86-%D8%A7%D9%84%D9%88%D9%84%D8%A7%D9%8A%D8%A7%D8%AA-%D8%A7%D9%84%D9%85%D8%AA%D8%AD%D8%AF%D8%A9-%D8%A7%D9%84%D8%A3%D9%85%D8%B1%D9%8A%D9%83%D9%8A%D8%A9

by **claud39** Wed Feb 12, 2020 8:47 am

The Arab Monetary Fund recommends increasing levels of economic diversification and trade and investment relations

12/02/2020

THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED TRADE TENSIONS BETWEEN THE UNITED STATES OF AMERICA AND CHINA: THEIR CAUSES AND EFFECTS ON ARAB ECONOMIES Rc_158149223918_23

THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED TRADE TENSIONS BETWEEN THE UNITED STATES OF AMERICA AND CHINA: THEIR CAUSES AND EFFECTS ON ARAB ECONOMIES Rc_158149223918_23

The Arab Monetary Fund recommended in a study published yesterday entitled: “Trade tensions between the United States of America and China: their causes and effects on Arab economies” by increasing levels of diversification of Arab economies, whether in terms of production or export structures and diversification in relation to trade and investment relations with different countries of the world with a focus on Continuous improvement of international productivity and competitiveness levels with the aim of increasing the levels of these economies' ability to face any external shocks.

The study also recommended the need to seize the potential opportunities for the trade dispute between the United States of America and China, which includes the relative transformation taking place from the intra-regional trade of the two countries to the Arab region through improving the business environment and investment climate and competition and improving the ease of doing business index, and restructuring the sectors associated with trade with China, especially in the framework of chains Global value and the Silk Road.

The study indicated that the trade tensions that have arisen between the United States of America and China and some of its trade partners since 2018 have left fingerprints on Arab economies due to the growing globalization of Arab economies and increased levels of exposure to the global economy in general, and to both the American and Chinese economies in particular. The study also confirmed that the challenges that Arab tensions leave as represented by the global economic slowdown as well as slow growth in the American and Chinese economies themselves, and the fluctuations in the financial and commodity markets, which could affect Arab exports, it may involve opportunities represented in the transformation Part of the trade between the two countries - America and China - to their trading partners, including the Arab countries, which requires the Arab countries to reconsider their economic and trade policies to deal positively with those effects.

The study issued by the Arab Monetary Fund expected that the unfavorable effects of trade tensions between the United States of America and China will be reflected in the economies of thirteen Arab countries in particular, including: Saudi Arabia, the United Arab Emirates, Oman, Qatar, Kuwait, Bahrain, Iraq, Algeria, Libya and Egypt , Morocco, Jordan, and Sudan through a number of transmission channels that are represented in the channel of external demand, international oil prices, and foreign direct investment flows.

Shifts in the global landscape

The study indicated that the global trading system has witnessed several transformations for decades, the most important of which is the trend towards commercial polarity, the change in the commodity structure of world trade, in addition to the change in the trade policies of the world. The study also stated that the world has known three waves of trade policies represented in: (1) trade protectionism since the thirties of the last century, (2) the liberalization of world trade after the Second World War, especially after the formation of the Bretton Woods institutions in 1944, and the growing influence of globalization and the emergence of blocs Regionalism and the establishment of the World Trade Organization (3) The emergence of new protectionism during the past two decades in light of the decline in popular support for globalization.

The return of trade protectionism

The study stated that trade wars are not new. Rather, it dates back to the 1930s, when the United States of America enacted the Customs Duties Law in 1930, which involved increasing customs duties in about nine hundred items of agricultural imports at a rate ranging between 40 and 48 per cent. Canada and countries decided European reciprocity, which precipitated the Great Depression, and then ignited the fuse of World War II in 1939. However, the pace of trade protectionism has increased significantly over the past two decades, especially with the escalation of discourse oriented to narrow national interests.

And with the beginning of 2018, the United States of America launched a new chapter of trade tensions when it announced its policy of imposing customs duties on imports from China - in addition to other trade partners such as the European Union, Mexico and Canada - which amounted to $ 283 billion in increasing customs duties to reach what ranges Between 10 and 50 percent, for these countries to raise tariffs on US imports valued at about $ 121 billion. In the aftermath of that, the United States of America decided in March of 2018 to impose customs duties at a rate of 25 percent on steel (valued at $ 50 billion), and 10 percent on aluminum imported from China. On the other hand, China announced its response by imposing a corresponding fee on its imports from America.

Economic and non-economic reasons

The study noted that the US-China trade tensions have overlapping economic and non-economic approaches. Foremost among the economic reasons is the growing US trade deficit with China, which reached $ 378.6 billion in 2018, accounting for 65 percent of the total US trade deficit. The United States also accuses Beijing of adopting a mix of trade, industrial, and monetary policies that enhance the competitiveness of Chinese products in American (and global) markets, such as controlling the local currency (yuan), and practicing protectionist policies - such as subsidies and financial support provided to domestic exporters - and espionage Industrial property, theft of intellectual property rights, forced transfer of technology, and others.

As for the non-economic reasons, it is represented by the escalation of the American approach to narrow national interests by raising the slogan "America First". The United States is betting, in its trade dispute with China, that the latter will not be able to withstand customs and non-tariff obstacles due to the dependence of Chinese exports on American markets, in the light of which (China) will be forced to sit at the negotiating table and accept the American terms.

Paradox

The study indicated a paradox that the American trade deficit did not stop despite the protectionist policy applied by the United States of America with China and other trading partners, and the reason for this is that America continues to import from China and the rest of its partners as a result of the dependence of its economic growth model on imports to meet the needs of high domestic consumption, especially In light of the high price of the dollar in global markets in 2018, which led to a decrease in the cost of imports (from the point of view of the American importer).

Negotiations

The study stated that the effects of trade tensions on the economies of the two countries and on the global economy have led them to negotiate a solution to stop these escalating tensions between them. Most of these negotiations have not yet led to a complete end to the trade tension between the two countries, as it resulted in the parties in December of 2019 reaching a commercial and economic "first stage" agreement, which includes a gradual abolition of fees, and China spending 50 billion dollars to buy American agricultural commodities. , Strengthen the protection of intellectual property rights, expand market access, and protect the rights of foreign companies in China.

Effects on the American and Chinese economies

The study confirmed that the economy of both America and China was affected by the trade tension between them, so American exports to China decreased from 12.4 billion dollars in March 2018 to 10.4 billion dollars in March 2019, registering a decline of 19 percent as a result of customs duties imposed by China on American imports Which is estimated to total 110 billion dollars. The prices of Chinese goods on the American market also increased as a result of the imposition of customs duties, which were paid by American companies and borne by the American consumer. In this context, the losses incurred by American consumers and companies are estimated at 51 billion dollars, or about 0.27 per cent of the US gross domestic product, and the result is a decrease in real income in the United States of America by 1.4 billion dollars per month at the end of 2018.

The effects on the Chinese economy are represented by the decline in Chinese exports to the United States of America, which decreased from $ 52.2 billion in October 2018 to $ 31.2 billion in March 2019, a decrease of 40 percent within five months, not to mention the restrictions set by the administration American companies in front of Chinese companies have access to the US communications technology market.

Global implications

Trade tensions between the United States of America and China have affected the global economy and international trade through their impact on the overall demand for imports for each of them, and consequently the impact on the global economy, and have led to severe disturbances in global value chains, especially in products that are extensively entered into Trade between the two countries, such as technical equipment and cars, and on financial markets. These effects have led the central banks of the two countries and a number of countries to make changes in their monetary policies in an effort to reduce the risks of growth, towards more facilitation and expansion in order to reflect the deflationary pressures of trade tensions.

On the other hand, the effects of the said trade tensions are the shift of trade, that is, the change of intra-US trade trends to other partners of the two countries. For China, the loss of its exports to America has resulted in a shift in trade in favor of Taiwan, Mexico, the European Union and Vietnam, with another part of its trade potentially shifting to Africa. For the United States of America, the beneficiary of trade transformation is the European Union plus Canada and Mexico. In the context of trade transformation, the net effect of the impact of trade tensions on global trade is the difference between the volume of global trade before and after trade transformation.

Channels of transmission of monuments

The study indicated that there is a group of channels through which trade tensions can be transmitted to Arab economies, focused on three main channels, namely: external demand, international oil prices, and foreign direct investment flows. In terms of the channel of external demand, the Arab countries are considered one of the largest geographical regions exposed to the global economy represented by the value of international trade to the gross domestic product, especially in light of the contribution of external demand by about 48 percent of the total total demand in the Arab countries. In addition, the United States of America and China are among the most important trading partners for Arab countries, as the two markets absorb about a fifth of the total exports of Arab countries, and if other Asian countries that are linked to the Chinese economy are added, the share of these trade partners increases to about 40 percent. Of Arab exports.

Arab exports to China and the United States of America have witnessed significant growth during the last decade, as their value increased to about $ 185 billion on average annually during the period (2011-2018) compared to $ 22 billion for the average annual Arab exports to the two countries during the period (1995-2000). ), Which represents about nine times. It is noted in this regard that the relative importance of the Arab countries' exports to China is higher compared to their exports to the United States of America starting in 2009. For example, the exports of the Arab countries to China in 2018 accounted for 2.3 times their exports to the United States of America.

According to the external demand channel, the impact of trade tensions between the two global poles on Arab economies is expected to come as a result of two different effects in terms of direction. On the one hand, it is expected that these tensions and their possible repercussions on the growth rates of both the United States of America and China will lead to a decrease in the levels of external demand of the two countries for the exports of the Arab countries, which would constitute an unfavorable impact on the economies of these countries. In this case, it is expected that nine Arab countries that are more exposed to the American and Chinese economies will be affected more by these tensions compared to other Arab countries, where exports of these countries to the American and Chinese markets constitute about 92 percent of the total Arab exports to these two countries.

On the other hand, the study expected that there will be a potential favorable impact of trade tensions on Arab countries as a result of the expected effect of "trade transformation" in light of the high tariffs imposed on intra-trade between the United States of America and China. It is striking in this regard that the recorded increase in exports of Arab countries to both the American and Chinese markets in 2018 in particular is the year that witnessed the beginning of trade tensions, as Arab exports to the United States of America grew by 20 percent, while Arab exports increased To the Chinese market by 47 percent in the same year, which may be due to the effect of the transfer resulting from the deepening trade tensions between the two countries and the transfer of a part of the foreign trade between the two countries to the Arab countries, as happened similarly in Mexico, Argentina and other countries Others that have benefited from these tensions.

In terms of the oil price channel, the increase in trade tensions undoubtedly leads to lower levels of oil demand in light of the high levels of uncertainty and declining levels of investor and consumer confidence, and thus the decline in world oil prices. In this context, trade tensions have resulted in slowing levels of the increase in oil demand from 1.5 million barrels per day in 2018 to 0.98 million barrels per day in 2019, according to OPEC estimates, and consequently, price levels decrease by nearly 10 percent in 2019. Accordingly, The persistence of trade tensions is reflected in the economies of the Arab oil-exporting countries in light of the high levels of dependence on oil, especially in eight Arab countries in particular. The contribution of the oil sector has between 30 to 50 percent of GDP, and between 67 to 89 % Of total public revenue, and the same 33 to 95 per cent of total exports.

Regarding the potential impact of the FDI inflows channel, the 2008 global financial crisis, tensions between the United States of America and China, and the partial return of traditional monetary policy pathways in some developed economies in 2018, resulted in a decrease in FDI inflows to developing countries in Low levels of investor confidence and uncertainties about public policies remained among the most important of trade policies. Like other developing countries, Arab countries have been affected by these developments, as the annual average of foreign direct investment flows to it declined from an average of $ 49 billion annually during the period (1995-2010) to $ 36 billion annually during the period (2011-2018). These developments are expected to affect, in particular, the economies of eight Arab countries that receive about 93 percent of the total FDI inflows to Arab countries.

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