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The economic impact of the US-China trade dispute

Author

Listed:
  • Lars Nilsson

    (European Commission)

  • Stephan Nolte

    (European Commission)

Abstract

This paper departs from the Trump administration’s main trade policy objective, i.e. to reduce the US trade deficit, which it considered to be harmful to the US economy. The main means for doing so has been to increase in import tariffs, despite most economists’ view that a country’s trade balance is driven by macroeconomic factors such as savings and investment rather than by trade policy. The paper reviews the various steps taken in the US trade dispute(s), primarily with China, including steps towards de-escalation in the final year of the Trump presidency. It then assesses the economic impact of the US trade dispute with China and the Phase One Deal, using computable general equilibrium (CGE) techniques. Importantly, it does so by updating the database to reflect the consequences of the shale gas revolution on US energy production and trade. Results are presented not only for the USA and China, but also on their trade with third countries by broad product category.

Suggested Citation

  • Lars Nilsson & Stephan Nolte, 2023. "The economic impact of the US-China trade dispute," International Economics and Economic Policy, Springer, vol. 20(4), pages 709-728, October.
    • Handle: RePEc:kap:iecepo:v:20:y:2023:i:4:d:10.1007_s10368-023-00574-9
    DOI: 10.1007/s10368-023-00574-9
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    References listed on IDEAS

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    2. Kyle Handley & Nuno Limão, 2018. "Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 5, pages 123-175, World Scientific Publishing Co. Pte. Ltd..
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    4. Sherman Robinson & Karen Thierfelder, 2019. "US-China Trade War: Both Countries Lose, World Markets Adjust, Others Gain," Policy Briefs PB19-17, Peterson Institute for International Economics.
    5. Decreux, Yvan & Valin, Hugo, 2007. "MIRAGE, Updated Version of the Model for Trade Policy Analysis: Focus on Agriculture and Dynamics," Working Papers 7284, TRADEAG - Agricultural Trade Agreements.
    6. Lars Nilsson, 2018. "Reflections on the Economic Modelling of Free Trade Agreements," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 3(1), pages 156-186, June.
    7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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    Cited by:

    1. Abdul Hadi Sultani & U. Faisal, 2024. "Exploring the dynamics of the balance of payments problems: the case of Afghanistan," International Economics and Economic Policy, Springer, vol. 21(3), pages 569-592, July.

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