The Impact of Chinese Retaliatory Tariffs on U.S. Cotton Industry

This research investigates the impacts of retaliatory tariffs imposed by China on U.S. cotton exports and the U.S. tariffs on Chinese textile products due to the recent escalation of trade dispute between these two largest economies in the world. The cotton industry seems to be severely undermined due to the intimate trade relationship between these two countries over time. This research utilizes the Global Trade Analysis Project (GTAP) model to generate estimates for export values, export volumes and employment situations in terms of cotton and textile sectors in the U.S. and the rest of the world. GTAP model can also predict changes in general economic well-being associated with the implementation of tariffs. To achieve these objectives, we proposed a special version of the GTAP model named GTAP-CTTN by redesigning the levels of regional and sectoral aggregations based on the latest release of standard GTAP database. The GTAP results underscore important potential economic consequences brought by the tariffs. As the U.S. trade policy exhibits inconsistency and even contradiction, it is crucial for decision-makers and farmers to beware of the vulnerability of cotton industry as well as the global cotton supply chain when facing tariffs enforced by trade partners.