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China-US trade friction and welfare: The role of regional trade agreements

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  • Ding, Guanzu
  • Guo, Guangyuan
  • Wu, Caiyun
  • Yu, Jiawen

Abstract

Since 2018, the U.S. has enacted several waves of import tariff increases on China, and China has imposed retaliatory tariffs on the U.S. Based on a quantitative trade model, we evaluate the impact of this China-US trade friction on the welfare of China and find that the adverse impact on China is larger than it is on the U.S. We further decompose the welfare impact into the terms-of-trade effect and tariff-revenue effect. We also analyze whether and to what extent China's involvement in the Regional Comprehensive Economic Partnership (RCEP) offsets the losses due to trade friction. Our model shows that the RCEP slightly benefits China by reducing the negative impact of China-US trade friction by 11.92%, with Manufacturing of Metal Products being the largest contributor to this effect.

Suggested Citation

  • Ding, Guanzu & Guo, Guangyuan & Wu, Caiyun & Yu, Jiawen, 2022. "China-US trade friction and welfare: The role of regional trade agreements," Economic Modelling, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:ecmode:v:113:y:2022:i:c:s0264999322001237
    DOI: 10.1016/j.econmod.2022.105877
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    4. Haichao Fan & Guangyuan Guo & Dongmin Hu, 2023. "Impact of U.S. Tariffs on Chinese Firms' Outward Connection," Annals of Economics and Finance, Society for AEF, vol. 24(2), pages 363-375, November.
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    6. Yingnan Cong & Yufei Hou & Jiaming Jiang & Shuangzi Chen & Xiaojing Cai, 2023. "Features and Evolution of Global Energy Trade Patterns from the Perspective of Complex Networks," Energies, MDPI, vol. 16(15), pages 1-17, July.

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    More about this item

    Keywords

    China-US trade Friction; RCEP; Welfare effects; Terms of trade; Tariff revenue;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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