US-China trade war could slash US$1 trillion from US economy in a decade warns Chamber of Commerce

The year is 2029, the US-China trade war is still being waged, and it has cost the American economy US$1 trillion.

That is the warning contained in a new report commissioned by the US Chamber of Commerce, which calculates the cumulative hit to US growth over the next decade should trade tensions with China continue to escalate.

The study, conducted by the Rhodium Group, unpacks the economic impact of three rounds of tit-for-tat tariffs to date and also estimates the effect of a tariff increase to 25 per cent on the US$200 billion of Chinese products currently hit with a 10 per cent duty by the US government.

It finds that the tariffs significantly reduce US gross domestic product (GDP), employment and investment, while export and import prices will rise, making US products less competitive overseas and consumer products more expensive for American shoppers.

“In the five years after tariffs are implemented, average annual US GDP would fall US$64 billion to US$91 billion (0.3 per cent to 0.5 per cent) short of baseline potential,” the study found.

Over a decade, the cumulative impact would leave GDP a total of US$1 trillion lower than it would have been without tariffs, the research found, should US President Donald Trump follow through with his threat to raise tariffs further on Chinese goods. The size of the US economy was about US$20 trillion at the end of last year.

The study focuses in particular on the information communication technology (ICT) sector, which has been heavily exposed to the trade war, finding that within five years of the tariffs’ introduction, exports of ICT goods – anything from microchips, to laptops, to semiconductors – could be 20 per cent lower than they were under pre-trade war conditions.