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US-China Trade War: Both Countries Lose, World Markets Adjust, Others Gain


  • Sherman Robinson

    (Peterson Institute for International Economics)

  • Karen Thierfelder

    (US Naval Academy)


The terms of the US-China trade war change often, but the tariff escalations have inflicted documented economic damage on both countries. Expanding the conflict will only increase the damage and reverberate across the world economy. This Policy Brief uses a computable general equilibrium model of the global economy to analyze three scenarios that could unfold in coming months. The first scenario is the current situation (as of June 2019). Two additional scenarios assume implementation of proposed US tariffs and Chinese responses. The models project the situation after the two countries and the rest of the world adjust across a time horizon of three to five years. For the United States, higher tariffs raise prices and reduce demand for consumers and producers. For China, the tariffs raise the prices of consumer goods but have less direct impact on producers, because the Chinese have exempted some intermediate inputs. US exports and imports decline under all three scenarios. But China can successfully divert its exports away from the United States and escape maximum economic damage.

Suggested Citation

  • Sherman Robinson & Karen Thierfelder, 2019. "US-China Trade War: Both Countries Lose, World Markets Adjust, Others Gain," Policy Briefs PB19-17, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb19-17

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    Cited by:

    1. Emmanouil Karakostas, 2022. "The Effects of Protectionism on the Exports of the Trade Partners: A Composite Index," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 15(1), pages 58-70, July.
    2. Yuleng Zeng, 2021. "Biding time versus timely retreat: Asymmetric dependence, issue salience, and conflict duration," Journal of Peace Research, Peace Research Institute Oslo, vol. 58(4), pages 719-733, July.
    3. Lars Nilsson & Stephan Nolte, 2023. "The economic impact of the US-China trade dispute," International Economics and Economic Policy, Springer, vol. 20(4), pages 709-728, October.

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