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Besides tit for tat: The effect of US 301 tariffs on Chinese local government spending

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  • Pan, Jiafeng
  • Du, Te
  • Fang, Chao

Abstract

Many studies have shown that the US-China trade war has harmed China's exports and economy. This paper analyzes whether local governments respond to US 301 tariffs through public spending. Using the variation of tariff exposure across cities, this paper finds that the tariff shock led local governments to increase public spending, mainly on social security and employment. Heterogeneity analysis indicates this effect was more pronounced in cities with higher openness, lower fiscal pressure, and lower saving levels. Robustness tests are provided.

Suggested Citation

  • Pan, Jiafeng & Du, Te & Fang, Chao, 2024. "Besides tit for tat: The effect of US 301 tariffs on Chinese local government spending," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005147
    DOI: 10.1016/j.econlet.2024.112030
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    More about this item

    Keywords

    The US-China trade war; Section 301 tariffs; Government spending; Social security and employment;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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