On Friday, the contentious China-U.S. trade conflict escalated after Beijing announced it will impose new tariffs on about $75 billion worth of U.S. goods. The announcement from China's Finance Ministry said the new duties on top of existing rates will take effect on Sept. 1 and Dec. 15. The move by China comes a little more than a week after Washington announced plans to impose tariffs on $300 billion worth of Chinese goods beginning Dec. 15.
"In terms of global spillovers over the short-term, we have seen and will likely continue to see some export gains in some specific sectors in specific countries," says Pepe Zhang, associate director for China at Atlantic Council's Adrienne Arsht Latin America Center.
A report published earlier this summer out of Japan that looked at the winners and losers of the trade wars lists Vietnam, Chile, Malaysia and Argentina as the top countries that benefit the most out of Beijing and Washington fighting over tariffs.
"Vietnam is by far the largest beneficiary, gaining 7.9% of GDP from trade diversion, where trade diversion is mostly additional U.S. imports," said the authors of the report published by the financial holding company Nomura. "For the next top three, Chile, Malaysia and Argentina, the trade diversion is mostly additional China imports."
Other economies on the list of winners are Hong Kong, Mexico, South Korea, Singapore, Brazil and Canada. In Europe, the biggest beneficiary is France, but overall countries on that continent will benefit the least out of the China-U.S. economic conflict.
"Over the past year, Vietnam and Korea have gained from U.S. import substitution in electrical appliances, Malaysia has benefited from semiconductors and Mexico, from motor vehicles," the authors of the Nomura report said. "On the other hand, for China tariffs (on the U.S.), the products in which third countries benefit most from China import substitution are mostly in agricultural and other commodities such as copper, soybeans, gold, aircraft, grains and cotton."
Brazil and Vietnam are some of the most interesting examples, Zhang says. In 2018, Brazil sent record volumes of soybeans to China as China significantly reduced its soybean exports from the U.S. In Vietnam, some American companies are starting to shift part of their supply chain in China to Vietnam.
Yet no matter the short-term gains, Zhang says the long-term picture is full of uncertainties, particularly amid a weakening global economic outlook.
"We've seen the reaction to financial markets in recent weeks as the trade tensions between the U.S. and China continue forward," he says. "Those kinds of tensions and uncertainties associated with all the trade negotiations is definitely not helpful for sustaining stronger and continuous global growth and it can have a downward pressure effect on global demand on prices and foreign investment outflows."