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The Consumption Response to Trade Shocks: Evidence from the Us-China Trade War
... Previous studies have already conducted studies related to the US-China trade war through the DID model. For example, the changes in US-China trade policies between 2017 and 2018 harmed US county-level consumption and employment (Waugh, 2019). A partial equilibrium model reveals that the US-China trade war harms both economies, with the US experiencing greater losses, while trade liberalization benefits both, particularly China, in consumer, industrial, and agricultural goods, and the US in consumer and industrial goods (Archana, 2020). ...
... Furthermore, our study extends beyond prior research by providing a comprehensive analysis of China's exports across various major trading partners during the trade war period. While previous studies have focused only on specific product categories, such as car sales or certain product categories (Archana, 2020;Tu et al., 2020;Waugh, 2019 ), or only on micro-level firm value like Huang et al. (2023), our study provides a holistic perspective that enriches the understanding of broader trade dynamics affected by geopolitical tensions. ...
Plain language summary
The effect of US-China trade war on China’s exports
This study systematically evaluates the impact of the US-China trade war on China’s exports to the US using a difference-in-difference (DID) model. Using China’s export to the US as the experimental group and China’s export to the EU, South Korea, Japan, ASEAN, and India as the control group with monthly data from January 2017 to October 2022, our results show that: First, there is a parallel effect where the export volumes of each country move in the same direction before February 2020. Second, the US-China trade war had a negative impact on the volume of China’s exports to the US. The increased tariffs led China’s exports to fall to the lowest point. The results were robust through parallel effect and placebo tests. This investigation highlights the causal relationship between trade dynamics and the observed contraction in exports, attributing a substantial portion of this decline to the trade disputes between these prominent global economies. For policymakers, in the face of trade friction, blind retaliation will further deteriorate the trade, and a multilateral consultative mechanism should be used to solve problems. Adjusting industrial structure and foreign trade strategy are important ways to resolve trade friction at the source.
... Such complexes are always of high interest to vacationers, who always want to visit them. "Also, today 4 cities of Uzbekistan and more than 31 historical monuments are included in the UNESCO World Heritage List" [25]. In the organization and implementation of cultural and historical recreation, it is necessary to determine the routes of travel of existing recreation groups to the objects. ...
... In September 2018, two countries imposed new tariffs on $200 billions of Chinese products and $60 billions of US products (Bown, 2018). In December 2018, they announced a tariff truce and started negotiating process [25]. ...
It is considered necessary for market relations to improve state budget, tax policy and tax administration in
line with economic reforms and economic development. Because the full implementation of the state budget-tax
policy depends on the effective organization of tax administration mechanisms. In the article, the authors conducted
research on e-commerce and its development trends, taxation issues. Based on the results of the research, the need
to organize the tax administration of e-commerce, its socio-economic importance, theoretical-legal issues were
assessed based on the study of local and foreign practice. He also made suggestions and recommendations for
improving the tax administration based on the results of his research on the topic.
... Li, He and Lin argue that the US has more to gain than China in the trade war negotiations based on numerical stimulation results and therefore claim that the US has more bargaining power than China [20]. Conversely, using evidence of the consumption effects of trade shocks, Waugh suggests that China's retaliatory tariffs will lead to concentrated welfare loss in the US [21]. A more general argument is that neither China nor the US will win in the trade war, only cooperation can lead to a win-win situation. ...
... We can see that the trade war had a significantly stronger negative effects on US demand for Chinese products and services. If we only focus on the economic consequences of the trade war, it seems that US customers suffered greater losses, which is consistent with Waugh [21]. However, as the trade war was launched by President Trump, I attribute the stronger negative effect on US imports of Chinese products and services to a trade-off with the objective of gaining more bargaining power during the negotiation process. ...
This chapter examines the use of artificial intelligence (AI) techniques in natural language processing (NLP) for risk management, with a particular focus on applications in the field of political economics. The aim of this analysis is to identify and measure potential political risks by conducting a textual analysis of newspapers and social media, using sentiment scores as proxies for nationalism. The study uses the 2019 US-China Trade War as a natural experiment to evaluate the impact of international disputes on political risks. One significant finding is the positive effect of the trade war on sentiment in China’s media about the US, which is attributed to the Chinese government’s efforts to mitigate the negative impact of the trade war on international relations. The study also reveals a negative impact on bilateral imports due to the conflict. Furthermore, the study employs a Difference-in-Difference (DID) model to investigate the impact of news censorship on media during the trade war. It is found that China’s regulators attempted to soften domestic anti-US sentiment, while the US media reported more negatively about China during the conflict. Overall, this analysis demonstrates how NLP technology can be effectively used to identify changes in the management of political risks by analysing news and other media.
... Similarly, research in the Federal Reserve Board finds that its positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory (Amiti et al., 2019). Moreover, there is plenty of research leading to similar result indicating the effect on various aspects of both the U.S. and China economy, such as Amiti et al. (2020), Amiti et al. (2019), Waugh (2019), Flaaen and Pierce (2019), and Cui and Li (2021). ...
This study examines whether Donald Trump's tariff policies, particularly the US-China trade war initiated in 2018, delivered on promises to revitalize American manufacturing and create jobs. Using county-level business application data from 2018-2025, we analyze the relationship between tariff implementation and new business formation through linear regression analysis. Our findings reveal a statistically significant positive association between US tariffs on China and American business applications. However, when Chinese retaliatory tariffs are included in the analysis, their negative coefficient substantially exceeds the positive US tariff effect, suggesting that retaliatory measures largely offset the benefits of protectionist policies. Control variables including inflation rate, federal funds rate, and government spending show significant positive effects on business formation. These results indicate that while protectionist trade policies may stimulate domestic business formation, their effectiveness is significantly diminished by retaliatory responses from trading partners. The study provides evidence that unilateral tariff measures without diplomatic coordination produce limited net benefits, confirming that trade wars create scenarios where potential gains are neutralized by counteractions.
... Since demand was reduced with huge economic repercussions, soybeans were among those worst affected. Before the trade war, China was the largest customer of U.S. soybeans, buying about 30% of the crop in the United States (Waugh, 2019). This resulted in massive overstocking in the United States soybean market, ultimately driving down prices. ...
... Retaliatory measures against the US involved tariffs on consumption goods, automobiles, and agricultural commodities. Waugh (2019) shows Chinese retaliatory tariffs were imposed on highly exposed counties, reducing US export capacity. Estimating the elasticity is challenging due to limited data at the HS 6-digit level, which lacks granularity and obscures variations in trade flows. ...
This paper explores the welfare costs of trade barriers, which depend on trade elastic-ities. State-of-the-art literature uses tariffs as an instrument to structurally identify them. Studies using Trump tariffs in the US estimate modest elasticities, implying low welfare costs. In this paper, I build a two-country model of political economy to explain these results and introduce a novel identification strategy to estimate elasticities. The model features a selection mechanism for goods chosen for treatment, based on the government's objective function and the state of the economy. When raising revenue, the government imposes tariffs on sectors with low demand elasticity. In response, the other country retaliates by targeting goods with high demand elasticity to maximize economic harm on the trade partner. This provides a framework for two possible instruments: protectionist and retaliatory tariffs. As trade policy targets the extremes of the demand elasticity distribution, Trump's protectionism aligns with modest elasticity estimates of the lower bound. Using administrative data from Canadian imports, I employ the 2018 retaliatory tariffs against the US as an instrument to estimate the elasticities corresponding to the upper bound. I find the demand elasticity for imports ranges between 2.5 and 5.2, while the supply elasticity of exports is zero. This suggests that welfare costs could double, reaching up to $22 billion.
... The literature on the U.S.-China trade disputes unfolds across four primary strands. The first strand explores the differential economic impacts of these disputes, delineating the winners and losers (Caliendo and Parro 2022;Guo et al. 2018;Li, He, and Lin 2018) across various metrics such as trade flows (Handley, Kamal, and Monarch 2020), economic growth (Waugh 2019), consumer welfare, domestic prices (Cavallo et al. 2021), and investment patterns (Caldara et al. 2020). Studies in this vein, for instance, have highlighted how increased tariffs led to declines in U.S. manufacturing employment and surges in producer prices, placing a disproportionate burden on domestic consumers without affecting the prices received by foreign exporters (Amiti, Redding, and Weinstein 2019;Flaaen and Pierce 2019). ...
Background
The trade conflicts between the United States and China have significantly disrupted global trade and economic growth. In today's globalized economy where the production of goods and services spans across multiple nations, these disputes have far‐reaching consequences that extend beyond the involved parties and impact the broader global economy.
Objective
We examine the effects of the U.S.‐China trade disputes on multinational investment patterns in China and Southeast Asia.
Methods
Using a dynamic compositional approach, we analyze data on firm‐level greenfield foreign direct investment.
Results
We observe European firms increasing their investments in China to enhance market penetration, while American firms are withdrawing, redirecting their focus toward Southeast Asia to mitigate dependence on the Chinese market.
Conclusion
This shift highlights broader international business strategy trends amid geopolitical and economic changes. The results indicate significant transformations in global supply chains, shedding light on the extensive effects of U.S.–China trade tensions on global economic equilibrium and how these tensions are reshaping international investment and supply chain dynamics.
... Much research has examined the impact of the deteriorating relationship on U.S. prices, new automobile sales, welfare, foreign direct investment in both China and the United States, and the spillover e ect on their trading partners, especially Asian economies. 16 e ndings are rather consistent: the con ict would lead to a loss-loss situation for both sides. For instance, the Financial Times reports that the U.S. tariff battle with China cost American colleges considerable revenue. ...
Using novel monthly air passenger traffic data, we assess the impact of U.S.-China tensions on people in flows from China to the U.S. We find that there was a 6 percent decline in air passenger flows from China to the U.S. compared to other source countries during the period between 2017 and 2019. When differentiated by geographical locations, relative to other U.S. airports, U.S. airports near universities with a significant presence of Chinese students are found to have experienced a more than 10 percent annual drop in passengers originating from China. A further investigation reveals that the decline in people in flows is mainly attributed to the loss of passenger arrivals in August and that this decline is consistently more significant than the decrease experienced by airports near tourist destinations during the same period. These findings provide updated evidence of the detrimental effect a hostile political climate could have on international people mobility between two major scientific powers.
... Research documents almost complete pass-through of the tariff burden to U.S. prices (Amiti et al., 2019;Cavallo et al., 2021) and adverse effects on consumption (Waugh, 2019), investment (Amiti et al., 2020), and employment (Flaaen and Pierce, 2019). Our focus on a banking channel of trade uncertainty transmission emphasizes that, importantly, the effects of international trade uncertainty come on top of the documented effects of tariffs. ...
This paper uses U.S. loan-level credit register data and the 2018–2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks’ ex-ante exposure to trade uncertainty and find that an increase in trade uncertainty is associated with a contraction in bank lending to all firms irrespective of the uncertainty that the firms face. This baseline result holds for lending at the intensive and extensive margins. We document two channels underlying the estimated credit supply effect: a wait-and-see channel by which exposed banks assess their borrowers as riskier and reduce the maturity of their loans and a financial frictions channel by which exposed banks facing relatively higher balance sheet constraints contract lending more. The decline in credit supply has real effects: firms that borrow from more exposed banks experience lower debt growth and investment rates. These effects are stronger for firms that are more reliant on bank finance.
... Due to the trade war, exports, employment and consumption are reduced, leading to welfare losses. 96 Also, as some of the additional duties have been levied upon raw materials such as aluminium and steel, manufacturer costs have risen, such as those of the automobile industry on the US side. ...
... Finally, it is important to emphasize that the welfare e↵ects of the trade war in the United States are importantly shaped by the retaliatory tari↵s applied by trading partners, as found in Caliendo and Parro (2022), Caliendo and Parro (2020), and Fajgelbaum, Goldberg, Kennedy, and Khandelwal (2019). Waugh (2019) studies the consumption e↵ects of the U.S.-China trade war across U.S. counties using detailed high-frequency data for the universe of new auto sales at the county level. The author finds that counties relatively more exposed to the retaliatory tari↵s from China experienced a 3.8 percentage point decline in consumption growth. ...
... Initially Source -Peterson Institute for International Economics, data accessed 23 May 2021 at https://www.piie.com/research/piie-charts/us-china-trade-war-tariffs-date-chart These extensive increases in tariffs had inevitable effects on trade which have been studied by several scholars, both within international institutions and central banks (Bekkers and Teh 2019;Caceres et al. 2019;Charbonneau and Landry, 2018;Freund et al. 2018;Handley et al. 2019;Viani, 2019) and in more academic contexts (Amiti et al. 2019;Bellora and Fontagné, 2019;Cavallo et al. 2019;Fajgelbaum et al. 2020;Felbermayr and Steininger 2019;Fetzer and Schwarz 2019;Waugh 2019). Most of these studies found that the trade war would have negative impacts on trade and economic growth in both the US and China. ...
A key change in the field of international trade in recent decades is the growing interconnectedness of geographically dispersed trade and production patterns, which increasingly take place within so-called global value chains (GVCs). In this Chapter we discuss these changes in international trade and production, why they occurred and what role GVCs have played. We then show how GVCs have also changed the politics of trade and, as such, the nature and outcomes of trade disputes. Firstly, the position of firms within GVCs has often become a more important determinant of their trade preferences than their nationality. In addition, as GVC structures can be adjusted in response to trade restrictions, trade wars have become more difficult to 'win'. We also discuss how GVC trade has become increasingly controversial and that this backlash against GVCs and globalization more broadly, has played a key role in the fuelling of trade wars.
... -The consequences of tariff hikes hit the U.S. farm sector forcing the US government to provide financial assistance for those directly impacted by retaliatory tariffs (Hopkinson, 2019); China's retaliation led to welfare losses in the US (Guo, et al., 2018;Waugh, 2019). ...
Special and Differential Treatment: Contestations, Responses and the Question of Global Equity.
... 7 The trade war is also predicted to have negative spillover effects on the rest of world, such as slowing global trade and economic growth (Itakura, 2020;Mao & Görg, 2020;Tam, 2020). For the trade war's effects on specific countries, studies have illustrated that the US exports to the world would experience a sizeable decrease as exposed to Chinese retaliatory tariffs because of shared value chains (Bellora & Fontagné, 2020), and the tariff barriers have an almost complete pass-through effect on the price of imported goods in the United States, which decreases consumer welfare (e.g., Amiti et al., 2019;Cavallo et al., 2019;Fajgelbaum et al., 2020;Waugh, 2019). From the perspective of Chinese market, economic growth, output, employment, and current account balance were testified to be negatively influenced (e.g., Chong & Li, 2019;Qiu et al., 2019;Li et al., 2020). ...
With an event study approach, this study examines the valuation effects of the US–China trade war. It is found that Chinese listed firms with American managers record lower announcement returns than their counterparts. This effect is heterogenous for firms with different foreign exposures. Specifically, the negative effect is more pronounced for firms exporting to the US market, while other foreign exposures, such as overseas direct investments and foreign shareholders mitigate the negative effects of American managers. These findings provide micro‐level evaluation of trade policy with the combination of stock market and corporate governance.
... The US and China, the subjects of this study, are the primary economic and military powers in the world. Their recent trade war, the so-called US-China trade war, has received a great deal of international attention, and has raised academic concerns about the detrimental effects on various macroeconomic and financial variables, such as price and welfare (Amiti, Redding, & Weinstein, 2019), investment (Amiti, Kong, & David, 2020), consumption (Waugh, 2019), energy demand (Xia, Kong, Ji, & Zhang, 2019), and financial markets (Zhang, Lei, Ji, & Kutan, 2019). However, few studies have focused on economic policy uncertainty (EPU) spillover among different categories. ...
This study investigates the interconnection of policy uncertainties between
the world’s two largest countries, the US and China, and sheds light on whether and
how the US–China trade war affects each party. Given the deep-seated economic
integration and trade linkage between the two countries, these characterizations are
essential for understanding how policy shocks propagate spatially. Using fiscal,
monetary, and trade policy data from January 2000 to December 2019, I provide ample
evidence of bilateral, multilateral, and system-wide measures of policy uncertainty
connectedness. Monetary policy is most likely to be the leader of policy uncertainty in
China, while fiscal policy is more likely to be the leader in the US. The cross-category
connectedness is not constant over time. Overall, the direction of spillover is from the
US to China, although this changes in different periods owing to different environments.
These findings are useful for policymakers to monitor the effectiveness of policies and
to help investors avoid economic policy uncertainty shocks induced by return
fluctuations.
... We argue that these differences across local economies manifest in differences in the support for protectionist policies and candidates. Voters experience the competitive effects of international trade directly as employees of the affected firms, but also indirectly through local market conditions more broadly -for example, through downward pressure on home prices (Scheve and Slaughter 2001), and through a loss in expendable income among directly impacted employees that transmits to other industries, such as retail and restaurants (Waugh 2019). Guisinger (2017) further points to the importance of local economic conditions in voter evaluations of trade policy. ...
What explains political divisions over globalization? We develop a theory of institutional comparative advantage and examine its political implications. Production processes differ in the extent to which they rely on linkages between firms, and thus in their contract intensity. Where property rights are strong, such as in the United States, firms are better able to produce, and therefore export, contract-intensive products. This institutional comparative advantage eroded with the global strengthening in property rights institutions over the past decades, which left an imprint in domestic politics: vote shares for Donald J. Trump, who ran on an anti-globalization platform, were highest, and legislator votes on trade agreements were more protectionist, in U.S. counties with contract-intensive local economies. We offer a link between global institutional dynamics and domestic politics, identify a new source of cleavages over globalization, and highlight the importance of contracting institutions for the politics over globalization.
... Amiti, Kong, and Weinstein (2020) develop a new methodology to estimate the common and differential effects of an event on stock prices, based on which they predict theoretically and empirically that the US-China trade war reduces the investment growth rates of US firms. Using the DID approach that compares US counties by their exposure to China's retaliatory tariffs to the US, Waugh (2019) show that auto consumption growth, as well as tradable and retail employment in the US drop in response to the trade war. Most of these studies focus on the US market, Bolt, Mavromatis, and Wijnbergen (2019) derive theoretically that the US-China trade war dampens not only trade between these two countries but also global outputs. ...
... We focus on this episode of trade war and examine the consequences on trade, sectoral value added, jobs and welfare of this durable return to protectionism. This quasi-natural experiment has initiated in-depth economic analysis of the eects on trade and welfare for the US economy (Amiti, Redding and Weinstein, 2019a, Fajgelbaum, Goldberg, Kennedy and Khandelwal, 2020; on the pass-through of taris into prices (Cavallo, Gopinath, Neiman and Tang, 2019); and on consumption at the county level (Waugh, 2019). ...
Despite the “Phase One Deal” agreed on mid-December 2019, bilateral tariffs between US and China remain at unprecedented high levels, which will have long-lasting effects. US tariffs remain very high on parts, components and other intermediate products; similarly, only the last wave of Chinese retaliatory tariffs has been half cut. We investigate in this paper how such tensions between highly interdependent economies will impact trade, income and jobs. We rely on a set-up featuring General Equilibrium, imperfect competition and importantly differentiating demand of goods according to their use, for final or intermediate consumption. This authorizes tracing the impact of protection along the value chains, on prices, value added and factor
income. Additional tariffs from official lists are taken into account at the tariff line level, before being aggregated within sectors. Beyond the direct toll of sanctions, US exports to the world post a sizeable
decrease as a result of reduced competitiveness led by vertical linkages along the value chains. Because of the tariffs in place as of February 2020, three quarters of the sectors decrease their value added in the US. Consistent with political economy determinants, these twists of value added are transmitted to production factors, leading to sizeable creation and destruction of jobs, and reallocation of capital to the benefit of protected sectors, mostly at the expense of their clients. Ultimately, this paper sheds light on the economic consequences of policies disrupting global value chains.
... Chor (2019), Waugh (2019) and Bown, Jung and Lu (2019a). We find that this assumption is justified because the value of U.S. exports that we classify as being covered by retaliatory tariffs lines up well with those calculated by other researchers as well as those announced by U.S. trade partners, as reported in Table A2. ...
Since the beginning of 2018, the United States has undertaken unprecedented tariff increases, with one goal of these actions being to boost the manufacturing sector. In this paper, we estimate the effect of the tariffs---including retaliatory tariffs by U.S. trading partners---on manufacturing employment, output, and producer prices. A key feature of our analysis is accounting for the multiple ways that tariffs might affect the manufacturing sector, including providing protection for domestic industries, raising costs for imported inputs, and harming competitiveness in overseas markets due to retaliatory tariffs. We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via rising input costs.
By synthesizing both theoretical and empirical insights, this book offers a distinctive perspective on procedural justice within the context of anti-dumping investigations. The book highlights the disjunction between the provisions outlined in the World Trade Organization's Anti-Dumping Agreement (ADA) and the practical encounters faced by stakeholders such as exporters, regulatory bodies, and legal experts affiliated with the WTO. Employing a mixed-method approach, the research encompasses a comprehensive doctrinal analysis of procedural complexities alongside empirical investigations involving key stakeholders such as WTO legal experts, Chinese exporters, and investigating authorities. Furthermore, this book underscores the potential for enhancing procedural justice through either a comprehensive reform of the ADA or concrete measures such as a standardized anti-dumping questionnaire. Such improvements offered in the book have the potential to curtail the misuse of anti-dumping investigations, consequently mitigating a substantial number of disputes that might be brought before the WTO's Dispute Settlement Mechanism.
This paper studies the impacts of the 2018 U.S. tariff surges on export prices and adjustments of sales across different markets of Chinese exporters. The finding that U.S. tariffs did not affect the free-on-board price of Chinese exports is robust to controlling for firm-related fixed effects. While firms' exports to the U.S. dropped significantly, exports to the E.U. increased moderately and domestic sales or exports to other foreign markets were barely affected. Finally, by surveying managers of exporting firms, we shed light on potential impediments to firms' adjustments of export prices and sales.
Political conflict between nations sometimes leads to consumer boycotts. We examine the regional impacts of bilateral boycott activity by investigating the 2019 Korean consumer boycott of travel to Japan. Employing triple- and double-differences designs, we find that the impact of the boycott is large and regionally heterogeneous. Japanese prefectures with high (i.e., 75th percentile) pre-boycott dependency on visitors from Korea suffer bilateral export losses of 56.9 to 60.9 percent and aggregate export losses of 10.5 to 13.3 percent. Prefectures with low (i.e., 25th percentile) Korea dependency experience bilateral losses of 47.8 to 49.7 percent and aggregate losses of 3.3 to 4.2 percent.
The increasing size, scope, and cost of ad hoc programs underscore the importance of understanding their effects. This article examines how Market Facilitation Program payments affected farm household consumption expenditures. Payments received in 2018 from the Market Facilitation Program were consumed at statistically significant rates that are considerably larger than other income sources. Farm households may have prespent the second tranche of the 2018 program payments before they were received in 2019. The consumption behaviors of commercial, intermediate, and residence farm households are contrasted, and less consumption smoothing is noticed among more leveraged households.
This paper studies adjustments in labor demand firms exposed to the recent China-US trade war. Our analysis leverages information from a Chinese online job board and a firm-level measure of tariff exposure obtained from customs transactions data. Firms that are more exposed to US tariffs on Chinese goods responded by posting fewer job vacancies and offering lower wages. The latter is partly balanced out by increased non-wage compensation. We also find a negative relationship between US-tariff exposure and the educational background required in firms’ job ads. China’s retaliatory tariffs against the US does not appear to have a statistically significant systematic impact on hiring. The paper also reports heterogeneous adjustment patterns across firms of different size, ownership and product mix. Overall, the trade war reveals to have negative impact on firms and job-seekers in China.
Boosting domestic trade and increasing energy productivity are both main objectives of China's new normal in economic development. A relative increase in the share of domestic trade in the GDP tends to be accompanied by a relative contraction in the share of international trade. In raising energy productivity, given the important role of frontier technology embedded in international trade, there is a theoretically optimal share of domestic trade in the GDP. A particularly interesting issue is whether there is a nonlinear relationship between domestic trade and energy productivity. Based on panel data of 285 prefectural cities in China over the period 2004 to 2013, this paper first extends hyperbolic distance specifications within a parametric stochastic framework to the analysis of energy productivity and further examines the causal relationship between domestic trade and the growth of energy total factor productivity (TFP). We find that domestic trade indeed has an inverted U-shaped effect on the growth of energy TFP. This finding is robust to various checks, including using the interaction between the density of small rivers and the exchange rate as an instrument and alternative calculations of the growth of energy TFP. Furthermore, the finding echoes the strategy proposed by the Chinese government to build a new development pattern with a large domestic cycle as its mainstay and in which a dual domestic and international cycle would be mutually promoting.
In this note, we estimate the economic effects of the increases in tariffs between China and the USA since the beginning of 2018, taking into account the investment channel. As of the bilateral Phase One agreement in early 2020, the United States has raised tariffs on about 120 billion of US goods.
This paper concentrated on how US-China Trade conflicts would have impacts on Korean economy. Making the best use of WIOTs (World Input Output tables), this research focused on value added contents in trade instead of traditional trade statistics in the light of double-counting problem. Thus, the paper set two feasible bad-case scenarios: when China and US’s GDP fall and when China and US’s exports fall. Making a comparison of the results from the two models, the ripple effects that Korea would suffer from are bigger in China’s case. Even though it is under the same condition where China and US’s GDP identically fall by 1%, China’s case would bring about stronger impacts on Korea. In a nutshell, the outcome illustrates that the extent of the damage that Korea would undergo is always larger in China’s bad-case scenarios compared to US’s bad-case scenarios which reveals that Korea is more associated with China than US in global value chains. The findings of the analysis are arranged and diagrammed in a table as follows. Keywords: China, US, China-US Trade War, Korean Economy, WIOTs.
Recent tariff war witness return of protectionism measures as tariff barrier were raised by United States and other large trading partners, mainly China. The trade war literature analyzed the impact of tariff in details and estimated impact of tariff war on countries involved in the tariff war. However very little attention has been paid to analyze the impact of the trading partners having trade relation with US and China. This paper indulges in analyzing the impact of tariff war on India, country having significant trade ties with both US and China, yet not directly involved in tariff war. Using product level data of export and import, the paper analyzes the implication of tariff war on India through the lens of trade diversion and pricing power of the firms. The analysis reveals significant impact of tariff and retaliatory tariff on India's external trade which points towards possibility of substitution effect. Further paper observes heterogeneous impact of the tariff war across different product classification. Final goods export increased significantly due to US tariff. Also easily substituted products experience higher export growth due to tariff. The impact of tariff on imports remained significant as import from rest of the world soared due to tariff imposition. Finally the paper extends the analysis to quantity and unit price of the exports and imports. Using price and quantity analysis of export and import, the paper concludes that the tariff war impact apparently helped Indian exporters and the impact was broad based i.e. both on quantity and price of export. The impact on import was found to be volume based and no price impact was visible. JEL Classification: F1, F12, F13, F14
We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidentia firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and they represent 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.
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