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Lessons from US–China Trade Relations

Author

Listed:
  • Lorenzo Caliendo

    (School of Management, Yale University, New Haven, Connecticut, USA)

  • Fernando Parro

    (Department of Economics, Pennsylvania State University, University Park, Pennsylvania, USA)

Abstract

We review theoretical and empirical work on the economic effects of the United States and China trade relations during the past 20 years. We first discuss the origins of the China shock and its measurement and present methods used to study its economic effects on different outcomes. We then focus on the recent US–China trade war. We review methods used to evaluate its effects, describe its economic effects, and analyze whether this increase in trade protectionism reverted the effects of the China shock. The main lessons learned in this review are that (a) the aggregate gains from US–China trade created winners and losers; (b) China's trade expansion seems not to be the main cause of the decline in US manufacturing employment during the same period; and (c) the recent trade war generated welfare losses, had small employment effects, and was ineffective in reversing the distributional effects due to the China shock.

Suggested Citation

  • Lorenzo Caliendo & Fernando Parro, 2023. "Lessons from US–China Trade Relations," Annual Review of Economics, Annual Reviews, vol. 15(1), pages 513-547, September.
    • Handle: RePEc:anr:reveco:v:15:y:2023:p:513-547
    DOI: 10.1146/annurev-economics-082222-082019
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    More about this item

    Keywords

    trade policy; trade war; China shock; dynamic spatial economics; input-output linkages; US manufacturing employment;
    All these keywords.

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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