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Understanding the China–US trade war: causes, economic impact, and the worst-case scenario

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  • Terence Tai Leung Chong
  • Xiaoyang Li

Abstract

This paper studies the current trade war between China and the US from a historical standpoint. By comparing the ongoing trade war with similar trade conflicts in history, we reveal three major causes, with varying degrees of importance, from both economic and political perspectives. The trade war can principally be attributed to trade imbalances, the US midterm elections and rivalry over global economic dominance. As the fundamental conflicts between China and the US cannot be easily resolved, we hold a pessimistic view on the complete settlement of the trade war. In this paper, we perform a scenario analysis, which shows that in the worst-case scenario, China will suffer a 1.1% decrease in employment and a 1% GDP loss, which are not negligible, but manageable for China.

Suggested Citation

  • Terence Tai Leung Chong & Xiaoyang Li, 2019. "Understanding the China–US trade war: causes, economic impact, and the worst-case scenario," Economic and Political Studies, Taylor & Francis Journals, vol. 7(2), pages 185-202, April.
    • Handle: RePEc:taf:repsxx:v:7:y:2019:i:2:p:185-202
    DOI: 10.1080/20954816.2019.1595328
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    Cited by:

    1. Chi-Wei Su & Lu Liu & Kai-Hua Wang, 2020. "Do Bubble Behaviors Exist in Chinese Film Stocks?," SAGE Open, , vol. 10(4), pages 21582440209, December.
    2. Haoyuan Ding & Kees G. Koedijk & Tong Qi & Yanqing Shen, 2022. "U.S.–China trade war and corporate reallocation: Evidence from Chinese listed companies," The World Economy, Wiley Blackwell, vol. 45(12), pages 3907-3932, December.
    3. Yu, Miao & Zhao, Xintong & Gao, Yuning, 2019. "Factor decomposition of China’s industrial electricity consumption using structural decomposition analysis," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 67-76.
    4. Ignatia Martha Hendrati & Unggul Heriqbaldi & Miguel Angel Esquivias & Bekti Setyorani & Ari Dwi Jayanti, 2023. "Propagation of Economic Shocks from the United States, China, the European Union, and Japan to Selected Asian Economies: Does the Global Value Chain Matters?," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 91-102, January.
    5. Gong, Yuting & Li, Kevin X. & Chen, Shu-Ling & Shi, Wenming, 2020. "Contagion risk between the shipping freight and stock markets: Evidence from the recent US-China trade war," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).

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