what us industries benefit from exporting to china

US-China trade state of war: which sectors are most vulnerable in the global value chain?

Special

August fourteen, 2019, by Hugo Erken , Björn Giesbergen and Lize Nauta

What looked to be a relatively quiet summer on the US-China merchandise war front, has taken a new plow after the Usa announcement to up the dues at a later stage
In this study, nosotros focus especially on which segments of the Chinese and American economies are nigh vulnerable to a disruption of global supply chains acquired by the US-China trade war
Nosotros also appraise the impact for the netherlands as an example of a 'third country' where several industries will be harmed (indirectly) past these disruptions
R oughly fifty% of total gross US imports and exports consists of intermediate appurtenances; this figure is fifty-fifty college for Red china, for which lxx% of gross imports and 62% of gross exports are intermediates
Our assay shows that despite the bigger negative macro impact on Red china, the US is more than exposed to disruptions to bilateral intermediate trade flows than China
For the U.s., computers and electronic products, electronic equipment and textiles/shoes are the most vulnerable segments, at take a chance of both direct and indirect effects
For China, the forest and cork products industry is the most vulnerable to a disruption of supply chains acquired by higher tariffs. Ship equipment, paper products and pork production also have some vulnerabilities
The Dutch companies that are the nearly vulnerable in the supply chain between China and US are basic metals producers, manufacturers of computers and electronic products, paper products, and machinery products
Consumers in the Netherlands are likely to see touch on on prices in the coming period on computers and electronic products (such as smartphones), and electrical equipment (such every bit medical equipment) as the higher tariffs feed through in higher retail prices

Also available: a compact version in Dutch.

What beginning looked like a relatively quiet summertime, with the prospect of new negotiations between the The states and China in September, took a new turn in early on August. On the evening of August 1 (European time), US president Trump announced by tweet the decision to farther upward the dues in the long-running trade dispute with Cathay with some other set of tariff hikes effective September one. In the concurrently, this has already been postponed to Dec 15, 2019, at least for some goods. The principal reason for the determination was that Mr. Trump was not satisfied with how China had lived up to the agreements made during the tardily June G20 summit in Japan. These mainly concerned the limited purchases of agricultural products by Red china, and that China seemingly still exports fentanyl to the US. As a result, next to the 25% tariff on USD 250bn of imports from Cathay already imposed, the US is about to increase tariffs by 10% on imports that were not yet targeted (see also Giesbergen et. al, 2019).

Nosotros have been flagging the gamble of further acceleration of the trade war for quite a while. Afterward the G20 meeting, nosotros foresaw 2 major triggers that could lead to a renewed escalation in the menstruum ahead: the situation regarding Huawei and (too) limited purchases of American agricultural products past China. Only, in broader term, we have also been arguing that it would exist very difficult to reach a long-lasting and comprehensive bargain on all the unlike topics that have been put on the table. Indeed, we felt that the best result would probably be a can-kicking practice while staying in a stable-unstable equilibrium. Adjacent to the different views both sides may have on trade and investments, it is simply impossible for the US and China to bridge the gap on structural issues that the US wants to run into resolved, such as violation of intellectual belongings rights (IPR), forced technology transfer and exorbitant subsidies past the Chinese regime to Chinese land-owned enterprises (SOEs). Communist china is unable and unwilling to make commitments to alter these things. The question therefore was non if tensions would flare up once more, but when. Well, that fourth dimension has come, to put it mildly.

In this study, nosotros focus peculiarly on which segments of the Chinese and American economies are most vulnerable to a disruption of global supply chains caused by the bilateral trade war. In addition, we appraise the impact for the Netherlands as an example of a 'tertiary country' which might exist harmed indirectly by these disruptions. Dutch exporters might be trapped in the US-China supply chain, whereas Dutch consumers could feel the pinch when appurtenances imported from either Communist china or the United states get more expensive due to the tariffs.

Impact of the US-China trade state of war

In Nov 2018, we conducted an all-encompassing scenario study in which we analyzed the macro economic impact of the current trade conflict under the unlike protectionist measures and in case of a full escalation. The results showed that the overall macroeconomic impact of the merchandise war is much larger on the Chinese economic system than on the US.[1] These effects are partly the result of the asymmetric merchandise relationship betwixt both economical superpowers, where the US has the upper manus to target larger consign volumes from China to US shores (USD 540bn in 2018) than the other way effectually (USD 120bn). In the full escalation scenario we assumed that both countries would target their bilateral imports in full past higher tariffs.

Nosotros also anticipated a weaker Chinese currency (CNY) against the USD in case the Trump assistants announced another round of tariffs on all Chinese exports, given that Communist china's options to strike back with equal measures are far more than limited. Given that the USD/CNY currency pair breached the psychological level of 7 recently, we have now decided to switch to our full escalation scenario. Not just exercise we accept the prospect of renewed hikes in tariffs and a 'indicate' by China that it is willing to use its currency every bit a ways to mitigate or offset the touch of tariffs on its exporters, only we as well take increasingly belligerent language on both sides that suggests that it will become increasingly difficult to reverse course in this trade dispute. Some other important factor related to the disproportionate impact on China on a macro level is the fact that China is much more dependent on U.s. technology than the other way around. These factors together upshot in disproportionate negative effects for Prc.

In dissimilarity to the results of our November 2018 study, nosotros now zoom in on disruptions to global supply chains where the U.s.a. is more than exposed than Prc. This is i of the caveats of our previous analysis which nosotros want to research, next to potential effects from international firms offshoring their production from China.

Caveats previous scenario study

Firms stepping up offshoring from China

Our 2018 scenario study has the upside that we combine the direct impact on merchandise (using an econometric trade model) with dynamic productivity effects (using two productivity side models) for China and the US. Nevertheless, the study besides has a number of caveats.[2] Kickoff, many foreign firms are planning to footstep upward their effort to shift product lines out of Communist china. Examples are Apple, toymaker Hashbro, Nintendo and Samsung. Some of these firms already had plans to shift production to other Asian low-wage countries, such equally the Philippines, India and Vietnam, given ascent labor costs in Prc. Nonetheless, uncertainty caused by the merchandise war is putting this offshoring trend in overdrive. An exodus of foreign action from China will not only hurt Chinese production and employment, just will in the long run also reduce China's capacity to benefit from foreign noesis spillovers (Wang and Wu, 2016). See Hayat (2019) for an extensive coverage of RaboResearch on this topic.

Negative affect of global supply chain disruption

A 2d caveat of our previous scenario study is the fact that it does non include the negative touch of the trade war via a disruption of global value chains. Over the past decades, multinational firms have increasingly been exploiting international comparative advantages by relocating parts of their product processes abroad (encounter OECD (2013a), Baldwin and Lopez-Gonzalez (2015) and Auer, Borio and Filardo (2017)). In this way, foreign firms in more than advanced economies can, for example, benefit from relatively low labor costs in emerging and developing Asia for the assembly of goods, while marketing and R&D are located at the home base, which enables them to produce more efficiently and improve their competitiveness. The additional effect of these 'sliced-upwardly value' chains is that multinationals accept get more than reliant on intermediate products or commodities from away and are therefore also more vulnerable to certain price shocks caused past protectionist trade measures, such as import tariffs.

Nowadays, roughly 50% of full gross US imports and exports consists of intermediate goods; this effigy is even college for China, for which 70% of gross imports and 62% of gross exports are intermediates. These figures highlight the importance of taking global value chain integration into account when analyzing potential trade war effects. Therefore, in this written report we aim to map the vulnerabilities for unlike industries caused by a disruption of global supply chains by the US-China trade war.

Higher import tariffs on intermediates can directly and indirectly hurt companies in countries that have imposed tariffs. Amiti, Redding and Weinstein (2019) show that peculiarly domestic consumers are bearing the burden of the higher US tariffs implemented in 2018 and that the tariffs accept already altered the supply networks of United states firms. Gawande, Hoekman and Cui (2015) conclude that the increasing fragmentation of production across global value bondage (initially) may have prevented countries from raising trade barriers and inducing protectionist measures in the aftermath of the global fiscal crisis of 2008. The complex relations between the different fragments within global value bondage imply that any disruption in these supply chains generates amplified furnishings throughout industries and economies on a college scale. Frohm and Gunella (2017) judge that a 1% change in economic activeness in an industry's global value concatenation translates into 0.3ppts touch on on activeness of the sector.

Ultimately, firms confronted with higher costs for sure inputs will start to look for alternative suppliers who are not subject field to higher tariffs. However, a supply shift cannot exist organized overnight and involves transaction costs since other suppliers generally cannot meet proper requirements and know-how straightaway. Furthermore, if one compares the integration of global value chains nowadays to decades ago, at that place has been a dramatic change. The level of differentiation in value chains, which tin can be expressed past looking at trade in value added sub-components compared to gross merchandise, has conspicuously been on the rise (Blanchard, 2019). In terms of the trade war touch on on integrated value chains, we brand a distinction between directly and indirect impact for the countries involved, as well equally impact on third countries that are non straight part of the trade disharmonize.

Straight impact

The direct impact is felt past domestic producers who immediately face higher costs for foreign components needed in their production processes (Effigy one). For example, automobile manufacturer Tesla announced that the college tariffs on Chinese parts pushed up costs for the visitor past USD fifty million in Q4 2018. The college cost of intermediates ways that these companies will face either a deterioration in competitiveness due to higher retail prices (besides every bit college consign prices and a lower global market share) or an absorption of the higher costs, which will hurt their profitability. Another example related to the trade war is Huawei components. In May, the US already blacklisted Huawei. As a result, fundamental The states suppliers (such every bit Xilinx, Broadcom and Google) are unable to sell components to the Chinese telecom behemothic. Although the ban on Huawei mainly has a negative impact for Huawei itself, US and strange (east.yard. NXP) suppliers that operate in the Huawei supply chain are affected every bit well.

Mainland china, yet, likewise has some leverage over the United states of america in this respect: namely rare world metals or rare globe elements (REE). These metals are used for applications in the loftier-tech industry, for example in mobile phones, lasers and defence force material. China provided eighty% of these rare earths to the US between 2014 and 2017 (see USGC). Although some studies expect that China's dominance in this field will subtract in the longer term (e.g. Habib et al., 2016), in the short term the Usa loftier-tech industry remains vulnerable and an export restriction on REE by Cathay is an important chip on the bargaining table. Only it should be noted that president Trump at the aforementioned fourth dimension already seeks to increase domestic production of these metals.

Figure 1: Trade flows between the US and China — Figure i: Trade flows between the U.s. and China

Indirect impact

The indirect impact is related to domestic producers and consumers who face up higher costs or prices due to imported final goods that accept been exposed to higher tariffs. In this case an American company that has outsourced parts of its assembly to China and and then reimports these as goods for its final processing or for direct sale to its US customers is exposed to higher tariffs twice (see Figure 1). This is for case the example with Apple tree, which ships components to China for the assembly of its products and reimports the concluding products for distribution on the US and the global market. The indirect impact on Chinese firms is nigh probable significantly lower, simply because US firms utilise Prc as a manufacturing hub, and not the other way around. The more an individual company is exposed to an indirect impact of higher tariffs, the more than likely it will ultimately choose to move assembly lines out of China and seek culling locations (Hayat, 2019).

Indirect bear on on 3rd countries: the example of the Netherlands

Exporters and consumers in third countries might also experience the pinch from a disruption in supply chains between China and the United states. Exporters in third countries that are not direct involved in the merchandise conflict may be caught up in the supply chain between the US and People's republic of china and face cost increases on their intermediates. Have, for instance, a Dutch supplier for the semiconductors industry that ships its intermediates to Communist china. In Prc these parts are used in the production of mobile phones and and so shipped as concluding goods to the US (run into Figure 2). Consumers in third countries will also bear the brunt of disrupted supply chains: remember of more than expensive electronic products, such as laptops and computers that use more than expensive Chinese intermediates and are shipped from the United states to European shores (meet Effigy three). Or the other way around: Huawei customers in Europe that will be unable to receive updates of their operating systems.

Figure 2: Dutch producers might be caught in the US-China supply chain — Effigy ii: Dutch producers might be defenseless in the Us-Communist china supply chain

Figure 3: Indirect impact on Dutch consumers — Effigy 3: Indirect bear on on Dutch consumers

The central question in this report is which industries and related product groups of the US and Chinese economies are most susceptible to higher bilateral trade barriers which take a disruptive impact on supply chains. We already presented an overview of gross trade flows and related product groups in our previous studies. It should be noted that not all these groups accept been targeted with higher tariffs yet. As well, gross trade flows do non reflect the importance of internationally sliced-up value bondage. That is why an assessment of the dependency on particular intermediate goods is also essential. Below, nosotros discuss the vulnerabilities for the individual countries separately.

Usa vulnerabilities

We map 2 dependencies to decide to what extent value chains between United states industries are exposed to a disruption of the supply with China.[3] Get-go, we calculate the share of Chinese intermediates used by Us industries in their production (direct touch, vertical centrality in Effigy iv). Second, we assess what share of US value added is incorporated in gross China export to US shores (indirect impact, 10-axis in Figure 4). Finally, the size of the circles represents the share of industries in full value added, to illustrate the relative importance for the economy.[4] Ultimately, the more remote an manufacture is from the origin, the more than dependent this The states industry is on Chinese intermediates and the more exposed the industry is to price hikes caused by college import tariffs.

Figure 4: Dependency of US industries on Chinese intermediates — Figure 4: Dependency of The states industries on Chinese intermediates

Figure 4 shows that computers and electronic products, electronic equipment and textiles and shoes are the most vulnerable The states sectors in the current trade war. These product groups are most likely to be subject to price increases due to more expensive intermediates: more than than 20% of Usa production in these industries consists of Chinese intermediates. For the computers and electronic products category, the dependency is related to the supply of Chinese rare earth elements, mentioned before in this report. As a result, from a business perspective it is not surprising that, for example, footwear companies such as Nike and Adidas are warning about the potential upshot higher tariffs will have on the U.s.a. economy and consumers.

The computers and electronic products industry is as well indirectly vulnerable to higher tariffs: 7.5% of Chinese exports consists of US value added incorporated in these products. This is not surprising, as Us manufacturers use China equally a manufacturing hub for assembling laptops, mobiles, etc. This vulnerability is consistent with findings past Lovely and Liang (2018) who conclude that 87% of the tariff hikes on computers and electronic products (as part of the US protectionist package on USD 50bn of Chinese export goods in 2018) are borne by strange firms.

Prc vulnerabilities

To determine to what extent value chains between Chinese industries are exposed to a disruption of the supply with the United states of america, we also map two dependencies in a similar fashion every bit we measured the U.s. vulnerability before. When we shift our focus to Communist china, the wood and cork products industry is the well-nigh vulnerable to a disruption of supply chains caused by college tariffs: 7% of Chinese production in this industry depends on US intermediates and i.5% of US exports shipped to the People's republic of china in this category consists of Chinese value added. These results are in line with recent ascertainment by Bloomberg that there is increasing interest of the furniture industry operating in Mainland china to shift product lines to Vietnam. Information technology is no coincidence that Vietnam is amidst the highest ranked countries on our Where Will They Go index (Hayat, 2019).

Figure 5: Dependency of Chinese industries on US intermediates

Other industries that show some vulnerability are transport equipment and paper and press products. These industries are relatively less dependent on United states intermediates, but there is a relatively large share of Chinese value added incorporated in the U.s.a. export goods from these sectors which are shipped to People's republic of china. Think of cars, planes and helicopters. Finally, there are vulnerabilities in the agricultural sector, which mostly relate to the import of United states soybean for the Chinese pork industry, which our colleagues from Food & Agri Research (FAR) have repeatedly reported (see for example here). A final industry worth mentioning is computers and electronic products. This category for example relates to Huawei, which is dependent on US integrated circuits and operating systems. Although the dependency of this product category is non large in terms of share in total product (1.eight%), US intermediates are currently vital for Chinese high-tech manufacturers. Although China is making efforts to decrease reliability on foreign components and get self-sufficient, Chinese chip manufacturers are still years backside the technological leaders. This is in line with our previous scenario written report, which also mentions the asymmetric relation between the U.s. and Communist china in terms of technological spillovers.

Overall moving picture

The results shown in Figures 4 and v (meet also Appendix B) indicate that the U.s. is more exposed than Mainland china to disruptions in the U.s.a.-Prc supply chain. United states of america manufacturers are much more than reliant on Chinese intermediates than the other way around. United states of america firms are especially vulnerable in the computers and electronic products categories since at that place is as well a major part of Chinese export shipped to United states of america shores that consists of United states value added incorporated in these products. Against the backdrop of these vulnerabilities, it makes sense that U.s. companies are putting relocation of their production lines out of China into overdrive (Hayat, 2019).

One attribute that is not properly considered in this assay is the qualitative dependency within the supply chain. As mentioned, the dependency of the Chinese high-tech industry on US know-how incorporated in US intermediates may not exist large in terms of the share in total production (1.8%), but these components are still vital to this manufacture and it could take decades for China to become cocky-sufficient in these areas. In the end, Cathay is much more than reliant on US technological knowledge in order to propel productivity growth than the other manner effectually. Another caveat is related to foreign commutation developments. This written report is based on the assumption of static FX developments but changes tin can of course affect bilateral merchandise flows. Have, for instance, the weakening of the CNY against the USD since the nigh recent merchandise state of war escalation (brainstorm August).

Potential impact on '3rd countries': the instance of the Netherlands

In order to assess the impact of a disruption of supply chains on 'third countries', we use the Netherlands as an case. As said, at that place are ii conduits by which the Dutch economy could exist indirectly affected. Showtime, Dutch exporters might be trapped in the US-China supply chain, while Dutch consumers could experience the pinch when goods imported from either People's republic of china or the U.s.a. get more expensive due to the tariffs. Given that at present more US consumer products volition exist targeted by higher tariffs, the chances for this accept risen. See Figures two and iii for an illustration of the potential impacts on Dutch consumers and producers. For consumers, this mainly relates to higher prices for imported goods, which besides holds for producers together with a potential loss of marketplace share in these countries. For a more detailed description of our methodology and results for the Netherlands, please see likewise Appendix A and B of this report.

Dutch exporters

Figure half-dozen shows the Dutch export sectors which are well-nigh active in the supply chain between China and US. The vulnerabilities are especially nowadays for manufacturers of computers and electronic products, paper products, chemicals/pharmaceuticals, electric equipment, mechanism and basic metals. The touch on, however, should not be overstated, as in general nosotros are talking about a small proportion of total value added in these industries: between 0.2 and 0.3%. Then over again, for individual multinational Dutch companies the impact could exist quite substantial and some of them, such equally Philips, amidst several other multinational operating companies who are trapped in sliced-upwards value bondage, are taking precautionary measures to mitigate the negative effects of the tariffs. Philips reportedly expects the merchandise war volition shave off USD 69mln from cadre profits this year.

Dutch consumers

Figure 7 shows which product groups are prone to price hikes, for example for Dutch consumers. Particularly computers and electronic products -for instance Apple products, merely besides electronic medical products and instruments- shipped from the US to the Netherlands will be more expensive in the upcoming period, as college tariffs feed through into college retail prices. In addition, the Dutch consumer marketplace might see college prices for furniture shipped from China to holland. But the consequence on the latter is expected to exist lower compared to the offset two categories if one takes into account the figures presented in table B.4 of the appendix.

Conclusions and what's next?

In an extensive scenario study in November 2018 we analyzed the macroeconomic affect of the electric current U.s.-China trade conflict. These results showed that the trade war impact on a macro level is much larger on the Chinese economy than on the US. In contrast to the results of this scenario study—which thus showed disproportionately negative furnishings for China—we now zoom in on disruptions to global supply chains, to which the US is more exposed than Cathay. This was 1 of the caveats of our previous assay which we wanted to research.

Our latest results indicate that the Usa is more than exposed than China to disruptions in US-China integrated supply bondage. US manufacturers are much more than reliant on Chinese intermediates than the other way around. Us firms are especially vulnerable in the computers- and electronic products categories since in that location is as well a major part of Chinese consign shipped to US shores that consists of The states value added incorporated in these products. Against the properties of these vulnerabilities, information technology makes sense that United states companies are putting relocation of their product lines out of Communist china into overdrive (Hayat, 2019). For China, the wood and cork manufacture is almost vulnerable to a disruption of supply bondage caused by college tariffs. Ship equipment, paper and printing products and pork production also take some vulnerabilities.

One aspect that we are unable to examine in this analysis is the qualitative dependency within the supply chain. Every bit mentioned, the dependency of the Chinese high-tech industry on US know-how incorporated in The states intermediates may not be large in terms of the share in total production (1.8%), simply these components are however vital to this industry and it volition take decades before China may exist self-sufficient in these areas. In the end, China is much more reliant on The states technological noesis in lodge to propel productivity growth than the other mode around, which is i of the key reasons why the Chinese economy disproportionally bears the brunt in case of full trade war escalation between both countries.

Our analysis furthermore shows that Dutch companies that are the most vulnerable in the supply chain between China and Us are producers of basic metals, manufacturers of computers and electronic products, paper and printing products, and machinery. The touch, however, should not exist overstated, equally this concerns a small proportion of total value added in these industries: betwixt 0.2 and 0.three%. Nevertheless, individual multinational companies, including Dutch ones, could feel the compression of the trade war, especially if they are active in both countries. Finally, from an import perspective, Dutch consumers can wait price hikes of computers, electronics, medical products and instruments if the trade war intensifies further.

After the about recent declaration by the US to further up the ante past increasing tariffs by 10% on imports that were non yet targeted and China'southward subsequent retaliatory policies, it seems highly probable that we need to brace ourselves for a menstruation of prolonged tension between both countries (see also Giesbergen et. al, 2019). Therefore, this report provides valuable insights on the merchandise war impact from the perspective of integrated-value-chain assay.

Footnotes

[1] Under the scenario of the protectionist packages up and until Baronial 2019, we find a cumulative loss in GDP growth for Red china of one.5ppts upwardly to 2030 compared to a benchmark scenario without a merchandise war and even 5.7ppts in case of a full escalation. For the U.s., the estimated impact would exist much smaller, with an estimated cumulative varying from 0.9ppts and 1.6ptts in instance of total escalation.

[2] What might mitigate the negative impact of the merchandise war is accommodative fiscal and/or monetary policy by China and/or the US or a patriotic shift of Chinese consumer preferences from US to Chinese manufactured items; our analyses did not include these factors either.

[3] For a full overview of the methodological approach to determine the bilateral dependencies in terms of value chain integration, see appendix A. For a more detailed overview of underlying information of these figures and industries included, see appendix B.

[4] The value added share of business services, a sector which is inappreciably exposed, is included to reach an adequate scaling of each individual industry.

Literature

Amiti, 1000., S. Redding, and D. Weinstein (2019). The Impact of the 2018 Merchandise State of war on U.Southward. Prices and Welfare. CEPR Discussion Newspaper 13564.

Auer, R., C.Eastward.Five. Borio, and A.J. Filardo (2017). The Globalisation of Aggrandizement: The Growing Importance of Global Value Chains. CEPR Give-and-take Paper 11905.

Baldwin, R., and J. Lopez‐Gonzalez (2015). Supply‐chain trade: A portrait of global patterns and several testable hypotheses. The World Economy, 38(11), 1682-1721.

Blanchard, E. (2019). Trade wars in the global value concatenation era. VoxEU.

Erken, H.P.Chiliad., Yard. Every, B.C.J. Giesbergen and E. de Groot (2019). The The states-Cathay trade war in the rerun. Rabobank.

Erken, H.P.One thousand., B.C.J. Giesbergen and I. de Vreede (2018). Re-assessing the The states-China trade war. Rabobank.

Frohm, Eastward., and Five. Gunnella (2017). Sectoral interlinkages in global value chains: spillovers and network effects. ECB working paper serial no. 2064.

Gawande, K., B. Hoekman and Y. Cui (2014). Global supply chains and trade policy responses to the 2008 crisis. Earth Banking company Economical Review, 29(1), 102-128.

Giesbergen, B.C.J., E. de Groot and 1000. Every (2019). Usa-China trade war: no turning back. Rabobank.

Habib, K., L. Hamelin and H. Wenzel (2016). A dynamic perspective of the geopolitical supply risk of metals. Periodical of Cleaner Production, 133, 850-858.

Hayat (2019). Leaving Red china: Which Asian countries tin can do good from a relocation of manufacturing activities?. Rabobank.

OECD (2013a), Global value chains (GVCs): United states of america, Paris.

Wang, C. and A. Wu (2016). Geographical FDI noesis spillover and innovation of indigenous firms in China. International Business Review. Volume 25, Issue iv, August 2016, Pages 895-906.

Appendix A: Methodology and information

In order to analyse value concatenation integration betwixt the Usa and Prc and the extent to which kingdom of the netherlands is exposed to a disruption of these chains, nosotros use information from the 2018 release of the OECD Trade in Value Added (TiVA) database. This database offers land-level trade flows data for 34 industries (two-digit ISIC). Using this static dataset implies that we assume no commutation effects. Nosotros distinguish iv different flows of appurtenances and services which we will discuss separately below.

Menstruum 1: Foreign intermediates used in domestic product

Get-go, to assess the dependency of domestic production on intermediates, nosotros use the following equation:

where represents the share of intermediates of trading partner j in the production of industry i of country yard in year t, the exports of intermediates and Y is the gross production.

Flow 2: Reimported value added

The reimported value added of both China and the US is calculated past applying equation 2:

where is the reimported value added of country m from trading partner j in sector i and twelvemonth t, is the exported foreign value added and X represents export. Here we assume that the exported value added per sector from j to m has the same weight as the relative exports per sector between j and yard.

Flow 3: The impact on the Netherlands

Impact on Dutch producers

Employing the origin of value added indicator in the TiVA database helps us to measure the impact on Dutch producers, which we estimate with the adjacent equation:

where is the Dutch value added in sector i, exported from trading partner j to state thou in yr t. The term: represents the exported Dutch value added, X represents gross exports and is the total Dutch value added. We presume that the relative export flows between j and k accept the aforementioned weight as the value added flows.

Impact on Dutch consumers

To estimate the impact on Dutch consumers we use equation (i) and proxy the outcome to a part that flows to the Netherlands, see equation (iv):

Where is the imported production in sector i, from land m, in twelvemonth t that needs intermediates from trading partner j. Furthermore, are Dutch imports.

Different approach in calculating flow 2

The method used to calculate flow 3 can also be adopted for flow ii, with the equation becoming:

However, as the proxy is used to distinguish the country of destination instead of identifying the country'due south value added in total strange value added, information technology underestimates the actual menses of value added when bilateral exports are big. This method works best when there is a third state involved which has a relatively lower corporeality of exports compared to the other countries. The gross exports of the Netherlands are pocket-size compared to the full gross exports of the US and China. This makes it difficult to use the same approach for both types of analysis. Hence, we used this approach to calculate the impact for the Netherlands, and equation (ii) for calculating the reimported value added.

Table B.1: US-China value chain integration (Figure 4) — Tabular array B.1: U.s.-People's republic of china value concatenation integration (Figure iv)

Table B.2: US-China value chain integration (Figure 5) — Table B.2: The states-China value chain integration (Figure 5)

Table B.3: Impact the Netherlands via export side (Figure 6) — Table B.iii: Affect the Netherlands via consign side (Figure 6)

Table B.4: Impact the Netherlands via import side (Figure 7) — Table B.four: Impact the netherlands via import side (Effigy 7)

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