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The global propagation of the US–China trade war

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  • Minkyu Son

    (Economic Research Institute, Bank of Korea)

Abstract

This paper examines upstream propagations of the US–China tariff war in 2018–2019 through the lens of exports from 32 countries to China. Building an industry-country specific measure of input–output linkages with China, we obtain new empirical evidence that the US tariffs on Chinese imports had a significant adverse effect on third countries by dampening Chinese demand for foreign inputs. A one standard deviation rise in this upstream shock leads to a decline in the growth rate of exports to China by 2.6 percentage points. A quantification exercise shows that the upstream propagation of US tariffs has incurred an average GDP loss of 0.05 percent for these countries. Taiwan and Korea, key suppliers to China, were most severely hurt by this vertical effect. Firm-level analysis using a panel of Korean manufacturers lends further support to the importance of this vertical linkage channel.

Suggested Citation

  • Minkyu Son, 2022. "The global propagation of the US–China trade war," Empirical Economics, Springer, vol. 63(6), pages 3121-3157, December.
    • Handle: RePEc:spr:empeco:v:63:y:2022:i:6:d:10.1007_s00181-022-02231-7
    DOI: 10.1007/s00181-022-02231-7
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    References listed on IDEAS

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