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A welfare analysis of China's tariffs on U.S. hardwood products

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  • Zhang, Xufang
  • Haviarova, Eva
  • Zhou, Mo

Abstract

China has been the top importer of U.S. log and lumber since 2010. With the ongoing trade disputes between the U.S. and its trading partners, especially with China, it is of great interest to assess the potential impacts of different trade interventions on U.S. forest sector. In this study, we focus on hypothetical uniform tariffs by China on U.S. hardwood products in four scenarios: tariffs imposed on log, lumber, and veneer, respectively, and on these products altogether. With an emphasis on U.S. timberland owners as log producers, a two-stage partial equilibrium displacement model is applied to measure the vertical linkage between log and its secondary products, lumber and veneer, as well as the horizontal linkage between lumber and veneer. Assuming a 25% uniform tariff, our results show that the welfare effects on stakeholders in four scenarios highly differ but U.S. timberland owners suffer substantial welfare loss as a whole in all scenarios. U.S. consumers of lumber and veneer, on the contrary, benefit from China's uniform tariffs in general. The total of China's consumer surplus is negative with its import tariffs on log, lumber, and all three products. Vertical and horizontal linkages within the U.S. hardwood sector are confirmed in all scenarios. Lastly, trade deflection effect is captured as the U.S. would export more hardwood products to the rest of world (ROW), resulting in positive but small changes in consumer surplus in the ROW, in all scenarios.

Suggested Citation

  • Zhang, Xufang & Haviarova, Eva & Zhou, Mo, 2020. "A welfare analysis of China's tariffs on U.S. hardwood products," Forest Policy and Economics, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:forpol:v:113:y:2020:i:c:s1389934119303995
    DOI: 10.1016/j.forpol.2019.102085
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