The Impact of Economic and Foreign Trade Policy Uncertainties on the Foreign Trade Balance between U.S. and China: An Analysis with Boundary Testing and ARDL

This study analyzes the impact of the increase in economic and trade policy uncertainties in the U.S. and China on the U.S. foreign trade balance with China by using the Ng-Perron unit root test, boundary testing, and ARDL methods, with reference to the data for the period 2000:Q1-2021:Q3. The analyses indicated that the increase in uncertainties in U.S. economic policies had a positive effect on the U.S. foreign trade balance in the long run, while the increase in uncertainties in China's economic policies had a negative effect on the U.S. foreign trade balance in the short and long run. It was also found that increased trade policy uncertainties in the U.S. did not have a significant impact on the U.S. foreign trade balance while increased trade policy uncertainties in China was shown to negatively affect the U.S. foreign trade balance with China in the short and long run. All these indications suggest that U.S. trade sanctions against China do not benefit the U.S. The study also found that increases in the real exchange rate had a negative impact on the U.S. foreign trade balance in the short and long run, which justifies U.S. policy regarding the exchange rate pressures against China.