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U. S. Trade Policies and Their Impact on Domestic Vegetables, Fruits and Nuts Sector: Application of the GTAP-HS Modelling Framework

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  • Saeed, Wajiha
  • Hertel, Thomas
  • Chepeliev, Maksym
  • Golub, Alla
  • Beckman, Jayson

Abstract

Reversing a long-lasting consensus on trade liberalization, under President Trump’s Administration the US left the Trans-Pacific Partnership (TPP) negotiations, and later imposed tariffs of 25% on steel and 10% on aluminum imports from most countries. This initiated a large range of retaliatory tariffs on US goods extending well beyond these two commodities and included many vegetables fruits and nuts (VFN). This sector covers over 100 individual commodities that represent over 21% of the U.S. agricultural exports. For some of the individual ‘tariff lines’, tariff rates could reach up to 100%. We develop a modelling framework for the assessment of such tariff policies that include high levels of variation at the commodity level, since standard CGE approaches are deemed too coarse/aggregate to address these accurately. We combine the Global Trade Analysis Project (GTAP) with a sub-sector partial equilibrium model to create “GTAP-HS”. First, we construct a database with the GTAP VFN sector disaggregated into 79 commodities with explicit estimates of output and domestic absorption at the disaggregate commodity level or “HS” level. Second, we also capture the heterogeneity in substitution possibilities among different import supplies at the HS level. Applying this approach to the trade frictions, we find that the additional data structures and substitution possibilities at the tariff line level makes the GTAP-HS framework more flexible than the standard model. GTAP-HS reports lower reduction in U.S. VFN exports than the standard GTAP, and the magnitude of these differences depends critically on the specification of trade elasticities. If only tariffs on U.S. VFN exports are considered, U.S. VFN exports fall by 6.8% under the standard GTAP model, by 4.0% under the GTAP-HS with trade elasticities adopted from the standard GTAP, and by 5.0% under GTAP-HS with heterogenous trade elasticities at the HS6 level.

Suggested Citation

  • Saeed, Wajiha & Hertel, Thomas & Chepeliev, Maksym & Golub, Alla & Beckman, Jayson, 2020. "U. S. Trade Policies and Their Impact on Domestic Vegetables, Fruits and Nuts Sector: Application of the GTAP-HS Modelling Framework," Conference papers 330204, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330204
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    References listed on IDEAS

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    1. Zheng, Yuqing & Wood, Dallas & Wang, H. Holly & Jones, Jason P.H., 2018. "Predicting Potential Impacts of China’s Retaliatory Tariffs on the U.S. Farm Sector," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 33(2), June.
    2. Jason H. Grant & Thomas W. Hertel & Thomas F. Rutherford, 2007. "Tariff line analysis of U.S. and international dairy protection," Agricultural Economics, International Association of Agricultural Economists, vol. 37(s1), pages 271-280, December.
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