IDEAS home Printed from https://ideas.repec.org/a/bla/asiapr/v15y2020i1p77-93.html
   My bibliography  Save this article

Evaluating the Impact of the US–China Trade War

Author

Listed:
  • Ken Itakura

Abstract

We evaluate the impact of the US–China trade war using a dynamic computable general equilibrium (CGE) model of global trade. We conduct ex ante simulation analysis exploring three scenarios to understand how the trade war affects import tariffs, investment, and productivity. The escalation of the trade war reduces gross domestic product (GDP) in China and the USA by −1.41% and −1.35%, respectively. The trade war reduces nearly all sectoral imports and outputs in both countries. To reflect the important role of global value chains (GVCs), we modify the dynamic CGE model with agent‐specific import demands, and we explore the difference between the results for the two models relating to the trade war impacts on GDP and bilateral trade. When GVCs are accounted for, the negative impacts on bilateral trade are more widespread across countries, and world GDP in the modified model is reduced by −$US450 billion. These results suggest that the GVCs play substantial role in determining trade responses at the disaggregated level.

Suggested Citation

  • Ken Itakura, 2020. "Evaluating the Impact of the US–China Trade War," Asian Economic Policy Review, Japan Center for Economic Research, vol. 15(1), pages 77-93, January.
    • Handle: RePEc:bla:asiapr:v:15:y:2020:i:1:p:77-93
    DOI: 10.1111/aepr.12286
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/aepr.12286
    Download Restriction: no
    File URL: https://libkey.io/10.1111/aepr.12286?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Angel Aguiar & Badri Narayanan & Robert McDougall, 2016. "An Overview of the GTAP 9 Data Base," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 1(1), pages 181-208, June.
    2. URATA Shujiro, 2015. "Impacts of FTAs and BITs on the Locational Choice of Foreign Direct Investment: The case of Japanese firms," Discussion papers 15066, Research Institute of Economy, Trade and Industry (RIETI).
    3. Redding, Stephen & Amiti, Mary & Weinstein, David, 2019. "The impact of the 2018 trade war on U.S. prices and welfare," LSE Research Online Documents on Economics 102619, London School of Economics and Political Science, LSE Library.
    4. Tsutsumi, Masahiko, 2018. "The Economic Consequences of the 2018 US-China Trade Conflict: A CGE Simulation Analysis," CIS Discussion paper series 676, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    6. Ianchovichina, Elena & McDougall, Robert, 2000. "Theoretical Structure Of Dynamic Gtap," Technical Papers 28723, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Edward J. Balistreri & Christoph Böhringer & Thomas F. Rutherford, 2018. "Quantifying Disruptive Trade Policies," CESifo Working Paper Series 7382, CESifo.
    8. Ianchovichina,Elena & Walmsley,Terrie L. (ed.), 2012. "Dynamic Modeling and Applications for Global Economic Analysis," Cambridge Books, Cambridge University Press, number 9781107002432, October.
    9. Ianchovichina,Elena & Walmsley,Terrie L. (ed.), 2012. "Dynamic Modeling and Applications for Global Economic Analysis," Cambridge Books, Cambridge University Press, number 9781107011694, October.
    10. Marcus Noland, 2018. "US Trade Policy in the Trump Administration," Asian Economic Policy Review, Japan Center for Economic Research, vol. 13(2), pages 262-278, July.
    11. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Terrie Walmsley & Peter Minor, 2020. "US Trade Actions Against China: A Supply Chain Perspective," Foreign Trade Review, , vol. 55(3), pages 337-371, August.
    2. Byeongho Lim & Jeongho Yoo & Kyoungseo Hong & Inkyo Cheong, 2021. "Impacts of Reverse Global Value Chain (GVC) Factors on Global Trade and Energy Market," Energies, MDPI, vol. 14(12), pages 1-17, June.
    3. Mudan Wang & Xianqiang Mao & Youkai Xing & Jianhong Lu & Peng Song & Zhengyan Liu & Zhi Guo & Kevin Tu & Eric Zusman, 2021. "Breaking down barriers on PV trade will facilitate global carbon mitigation," Nature Communications, Nature, vol. 12(1), pages 1-16, December.
    4. repec:ags:aaea22:335549 is not listed on IDEAS
    5. Bekkers, Eddy & Schroeter, Sofia, 2020. "An economic analysis of the US-China trade conflict," WTO Staff Working Papers ERSD-2020-04, World Trade Organization (WTO), Economic Research and Statistics Division.
    6. Yanfang LYU & Linhui ZHAO & Dong WANG, 2023. "An Analysis of the Impact of US-China Trade Frictions on Chinese Manufacturing Industries from the Perspective of Trade Gains," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 43-56, December.
    7. Liu, Fangying & Su, Chi Wei & Tao, Ran & Qin, Meng & Umar, Muhammad, 2024. "Fintech and aluminium: Strategic enablers of climate change mitigation and sustainable mineral policy," Resources Policy, Elsevier, vol. 91(C).
    8. Ignatia Martha Hendrati & Unggul Heriqbaldi & Miguel Angel Esquivias & Bekti Setyorani & Ari Dwi Jayanti, 2023. "Propagation of Economic Shocks from the United States, China, the European Union, and Japan to Selected Asian Economies: Does the Global Value Chain Matters?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 91-102, January.
    9. Tampubolon, Jongkers, 2023. "Food and agricultural sector in Indonesia’s economic growth during COVID-19 pandemic: an ARDL approach," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 9(2), June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James A. Giesecke & Nhi H. Tran & Robert Waschik, 2021. "Should Australia be concerned by Beijing’s trade threats: modelling the economic costs of a restriction on imports of Australian coal," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(1), pages 1-22, January.
    2. Lee, Hiro & Itakura, Ken, 2018. "The welfare and sectoral adjustment effects of mega-regional trade agreements on ASEAN countries," Journal of Asian Economics, Elsevier, vol. 55(C), pages 20-32.
    3. J.A. Giesecke & R. Waschik & N.H. Tran, 2019. "Modelling the Consequences of the U.S.-China Trade War and Related Trade Frictions for the U.S., Chinese, Australian and Global Economies," Centre of Policy Studies/IMPACT Centre Working Papers g-294, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Terrie Walmsley & Peter Minor, 2020. "US Trade Actions Against China: A Supply Chain Perspective," Foreign Trade Review, , vol. 55(3), pages 337-371, August.
    5. Peter B. Dixon & Maureen Rimmer & Nhi Tran, 2019. "GTAP-MVH, A Model for Analysing the Worldwide Effects of Trade Policies in the Motor Vehicle Sector: Theory and Data," Centre of Policy Studies/IMPACT Centre Working Papers g-290, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Susara J. Jansen Van Rensburg & Riaan Rossouw & Wilma Viviers, 2020. "Liberalizing Bangladesh’s Services Trade: Is Joining Trade in Services Agreement the Way to Go?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 21(1), pages 99-121, March.
    7. Minor, Peter & Walmsley, Terrie & Strutt, Anna, 2018. "State-owned enterprise reform in Vietnam: A dynamic CGE analysis," Journal of Asian Economics, Elsevier, vol. 55(C), pages 42-57.
    8. Ken Itakura & Hiro Lee, 2023. "Should the United States rejoin the Trans-Pacific trade deal?," International Economics and Economic Policy, Springer, vol. 20(2), pages 235-255, May.
    9. Itakura, Ken, 2019. "Incorporating Global Value Chains into the Dynamic GTAP Model [tentative results]," Conference papers 333111, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
    11. Ken Itakura, . "Assessing the Economic Effects of the Regional Comprehensive Economic Partnership on ASEAN Member States," Chapters, in: Lili Yan Ing (ed.), East Asian Integration (First Edition), chapter 1, pages 1-24, Economic Research Institute for ASEAN and East Asia (ERIA).
    12. Ken Itakura & Yoshifumi Fukunaga & Ikumo Isono, 2013. "A CGE Study of Economic Impact of Accession of Hong Kong to ASEAN-China Free Trade Agreement," Working Papers DP-2013-06, Economic Research Institute for ASEAN and East Asia (ERIA).
    13. Aguiar, Angel H. & Walmsley, Terrie L., 2014. "The importance of timing in the U.S. response to undocumented immigrants: A recursive dynamic approach," Economic Modelling, Elsevier, vol. 41(C), pages 253-262.
    14. Rebecca Sta. Maria & Shujiro Urata & Ponciano S. Intal, 2017. "ASEAN @ 50 Volume 5: The ASEAN Economic Community Into 2025 and Beyond," Books, Economic Research Institute for ASEAN and East Asia (ERIA), number 2017-asean@50-5 edited by Rebecca Sta. Maria & Shujiro Urata & Ponciano S. Intal, October.
    15. Alessandro Antimiani & Valeria Costantini & Anil Markandya & Chiara Martini & Alessandro Palma, 2014. "A dynamic CGE modelling approach for analyzing trade-offs in climate change policy options: the case of Green Climate Fund," Working Papers 2014-05, BC3.
    16. Hiro Lee & Ken Itakura, 2014. "TPP, RCEP, and Japan's Agricultural Policy Reforms," OSIPP Discussion Paper 14E003, Osaka School of International Public Policy, Osaka University.
    17. Hiro Lee & Ken Itakura, 2015. "Applied General Equilibrium Analysis of Mega-Regional Free Trade Initiatives in the Asia-Pacific," OSIPP Discussion Paper 15E001, Osaka School of International Public Policy, Osaka University.
    18. Jungran Cho & Emma Kyoungseo Hong & Jeongho Yoo & Inkyo Cheong, 2020. "The Impact of Global Protectionism on Port Logistics Demand," Sustainability, MDPI, vol. 12(4), pages 1-17, February.
    19. Jayatilleke S. Bandara & Yiyong Cai, 2014. "The impact of climate change on food crop productivity, food prices and food security in South Asia," Economic Analysis and Policy, Elsevier, vol. 44(4), pages 451-465.
    20. Jane Golley & Rod Tyers & Yixiao Zhou, 2018. "Fertility and savings contractions in China: Long‐run global implications," The World Economy, Wiley Blackwell, vol. 41(11), pages 3194-3220, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:asiapr:v:15:y:2020:i:1:p:77-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/jcerrjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.