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The Substitution Effect of US‐China Trade War on Taiwanese Trade

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  • Chih‐Hai Yang
  • Kazunobu Hayakawa

Abstract

Using monthly trade data from January 2018 to December 2019, we empirically examine the effects of the US‐China trade war on Taiwan's exports as well as imports. On the export side, the tariff hike in the US against imports from China may increase Taiwan's exports to the US, (i.e., the substitution effect). To investigate this hypothesis, we examine how US tariffs on goods from China affect Taiwan's exports to the US. More directly, we also explore how China's exports to the US change Taiwanese exports to the US. On the import side, decline of China's export to the US may boost Taiwan's export while increasing its demand on Chinese intermediate inputs. Our empirical analyses confirmed the validity of these hypotheses. By contrast, we did not find a substitution effect in exports from neighboring countries—that is, Japan and South Korea.

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  • Chih‐Hai Yang & Kazunobu Hayakawa, 2023. "The Substitution Effect of US‐China Trade War on Taiwanese Trade," The Developing Economies, Institute of Developing Economies, vol. 61(4), pages 324-341, December.
    • Handle: RePEc:bla:deveco:v:61:y:2023:i:4:p:324-341
    DOI: 10.1111/deve.12378
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    Cited by:

    1. Hayakawa,Kazunobu, 2022. "The trade impact of U.S.-China conflict in Southeast Asia," IDE Discussion Papers 873, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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