Impact on China of incoming Trump Policy- an application of dynamic GTAP Model

This study considers the implications of US protectionism under the incoming Trump Administration for the United States and its trading partners, in particular for China. As future US trade policy is an unknown at this stage, we model an example of a US protectionist measure- general additional tariff on import from China, stimulate domestic investment and reducing tax rate of company revenue. We analyze their impact on China through dynamic GTAP model. The scenario results show that Trump’s possible policy will do harm to China’s development, especially make the target in 13-Five year plan harder to attain. One aspect of impact comes from the capital outflow from China, which could slow down the investment increase, the other impact comes from the trade protectionism which lead to the reduction of export to US from China. Considering the scenarios assumption that increasing 1 trillion investment during future 4 years in US, reducing tax rate of company revenue from 35% to 20% and additionally increase tariff by 45% from 2017 to 2020, China’s GDP will reduce by 1.2 trillion RMB at 2020 relative to baseline, the target of GDP DOUBLE compared to 2010 will hard to get. So China have to find some policy to be countermeasures.