(Bloomberg) -- The European Union, Canada and Mexico might be suffering more from the tariffs the U.S. and China have imposed on each other's imports than the two countries themselves.
A study by Germany's Kiel Institute shows that the interconnectedness of global supply chains renders the measures costlier for the countries' trading partners. That's because products subject to import tariffs are often processed as intermediate goods and then exported elsewhere, resulting in more expensive end products.
“Consider Apple's iPhone, which relies heavily on imported inputs from China. If the U.S. imports this product at higher tariffs, this increase will also feed into, say, exports of iPhones from the U.S. to Canada.” -- Kiel Institute study
The analysis considers only measures that have already been implemented. The indirect effect becomes particularly apparent for inputs originally sourced from China and subjected to U.S. tariffs, as these are more frequently used as intermediates than U.S. exports to China.
“Third countries cannot afford to stand back in the trade war and only watch it from the sidelines,” said researcher Holger Goerg. “Due to the strong integration in global supply chains, they themselves are also affected and have to accept considerable additional costs that affect both companies and consumers.”
--With assistance from Craig Stirling.
To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow
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