IDEAS home Printed from https://ideas.repec.org/p/kan/wpaper/202512.html
   My bibliography  Save this paper

Mediation Analysis of the China-US Trade War Effects

Author

Listed:
  • Zongwu Cai

    (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA)

  • Jinyan Li

    (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA)

Abstract

This paper examines the indirect effects of the ongoing China-US trade war on trade balances, employing a modified mediation analysis that includes lagged mediators to enhance the accuracy of traditional models. By integrating these lagged variables, our approach can capture the temporal dynamics. Through a comprehensive econometric analysis on indirect effects bypassing some mediators, we disentangle the direct and indirect effects of trade policies, highlighting the distinct impacts across major regions involved in trade between the two nations. Our findings suggest that the trade war has produced asymmetric effects on the trade balances of China and the US, with notable regional variation. For China, positive indirect effects are observed across all mediators, where rerouted supply chains helped maintain export flows under tariff pressures. In contrast, the US benefits more directly from the trade war, with strong direct effects and minor indirect effects across multiple regions. The inclusion of lagged mediators reveals the gradual adjustment of trade patterns over time, offering a more comprehensive perspective on how the trade war has reshaped global trade dynamics.

Suggested Citation

  • Zongwu Cai & Jinyan Li, 2025. "Mediation Analysis of the China-US Trade War Effects," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202512, University of Kansas, Department of Economics.
  • Handle: RePEc:kan:wpaper:202512
    as

    Download full text from publisher

    File URL: https://kuwpaper.ku.edu/2025Papers/202512.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jogeswar Mahato & Manish Kumar Jha, 2023. "Does financial inclusion promote sustainable livelihood development? Mediating effect of microentrepreneurship," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 15(4/5), pages 485-499, August.
    2. Liu, Lan & Yue, Chengyan, 2013. "Investigating the impacts of time delays on trade," Food Policy, Elsevier, vol. 39(C), pages 108-114.
    3. Cheng Hsiao & H. Steve Ching & Shui Ki Wan, 2012. "A Panel Data Approach For Program Evaluation: Measuring The Benefits Of Political And Economic Integration Of Hong Kong With Mainland China," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(5), pages 705-740, August.
    4. Bai, ChongEn & Li, Qi & Ouyang, Min, 2014. "Property taxes and home prices: A tale of two cities," Journal of Econometrics, Elsevier, vol. 180(1), pages 1-15.
    5. Yuchen Hu & Shuangning Li & Stefan Wager, 2021. "Average Direct and Indirect Causal Effects under Interference," Papers 2104.03802, arXiv.org, revised Jan 2022.
    6. Yuchen Hu & Shuangning Li & Stefan Wager, 2022. "Average direct and indirect causal effects under interference [Estimating average causal effects under general interference, with application to a social network experiment]," Biometrika, Biometrika Trust, vol. 109(4), pages 1165-1172.
    7. Jeffrey M. Albert & Suchitra Nelson, 2011. "Generalized Causal Mediation Analysis," Biometrics, The International Biometric Society, vol. 67(3), pages 1028-1038, September.
    8. Haixia Wu & Jianping Li, 2023. "The relationship between environmental disclosure and financial performance: mediating effect of economic development and information penetration," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(1), pages 116-142, January.
    9. Christian Dippel & Andreas Ferrara & Stephan Heblich, 2020. "Causal mediation analysis in instrumental-variables regressions," Stata Journal, StataCorp LLC, vol. 20(3), pages 613-626, September.
    10. Viviana Celli, 2022. "Causal mediation analysis in economics: Objectives, assumptions, models," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 214-234, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paul Berbée & Sebastian Till Braun & Richard Franke, 2025. "Reversing fortunes of German regions, 1926–2019: Boon and bane of early industrialization?," Journal of Economic Growth, Springer, vol. 30(2), pages 307-337, June.
    2. Yi Zhang & Kosuke Imai, 2023. "Individualized Policy Evaluation and Learning under Clustered Network Interference," Papers 2311.02467, arXiv.org, revised Mar 2025.
    3. Luofeng Liao & Christian Kroer, 2024. "Statistical Inference and A/B Testing in Fisher Markets and Paced Auctions," Papers 2406.15522, arXiv.org, revised Mar 2025.
    4. Zhentao Shi & Jin Xi & Haitian Xie, 2025. "A Synthetic Business Cycle Approach to Counterfactual Analysis with Nonstationary Macroeconomic Data," Papers 2505.22388, arXiv.org.
    5. Qi Li & Wei Long, 2018. "Do parole abolition and Truth-in-Sentencing deter violent crimes in Virginia?," Empirical Economics, Springer, vol. 55(4), pages 2027-2045, December.
    6. Fujiki, Hiroshi & Hsiao, Cheng, 2015. "Disentangling the effects of multiple treatments—Measuring the net economic impact of the 1995 great Hanshin-Awaji earthquake," Journal of Econometrics, Elsevier, vol. 186(1), pages 66-73.
    7. Du, Zaichao & Yin, Hua & Zhang, Lin, 2022. "Foreign buyer taxes and house prices in Canada: A tale of two cities," Journal of Housing Economics, Elsevier, vol. 55(C).
    8. Luya Wang & Zheng Li & Qi Li, 2023. "A Tale of Two Policies: Examining Treatment Effects on Housing Prices in Shenzhen, China," Annals of Economics and Finance, Society for AEF, vol. 24(2), pages 277-288, November.
    9. Luo, Shikai & Yang, Ying & Shi, Chengchun & Yao, Fang & Ye, Jieping & Zhu, Hongtu, 2024. "Policy evaluation for temporal and/or spatial dependent experiments," LSE Research Online Documents on Economics 122741, London School of Economics and Political Science, LSE Library.
    10. Carvalho, Carlos & Masini, Ricardo & Medeiros, Marcelo C., 2018. "ArCo: An artificial counterfactual approach for high-dimensional panel time-series data," Journal of Econometrics, Elsevier, vol. 207(2), pages 352-380.
    11. Du, Zaichao & Pei, Pei, 2021. "A simple and robust counterfactual impact evaluation," Economics Letters, Elsevier, vol. 207(C).
    12. Paul Berbée & Sebastian Till Braun & Richard Franke, 2025. "Reversing fortunes of German regions, 1926–2019: Boon and bane of early industrialization?," Journal of Economic Growth, Springer, vol. 30(2), pages 307-337, June.
    13. Eric Auerbach & Yong Cai & Ahnaf Rafi, 2024. "Regression Discontinuity Design with Spillovers," Papers 2404.06471, arXiv.org.
    14. Ke, Xiao & Chen, Haiqiang & Hong, Yongmiao & Hsiao, Cheng, 2017. "Do China's high-speed-rail projects promote local economy?—New evidence from a panel data approach," China Economic Review, Elsevier, vol. 44(C), pages 203-226.
    15. Zongwu Cai & Jinyan Li, 2024. "Econometric Evaluation of the China-US Trade War Effects," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202419, University of Kansas, Department of Economics, revised Apr 2025.
    16. Zhang, Linling & Long, Ruyin & Chen, Hong, 2019. "Do car restriction policies effectively promote the development of public transport?," World Development, Elsevier, vol. 119(C), pages 100-110.
    17. Cyrus Samii & Ye Wang & Jonathan Sullivan & P. M. Aronow, 2023. "Inference in Spatial Experiments with Interference using the SpatialEffect Package," Journal of Agricultural, Biological and Environmental Statistics, Springer;The International Biometric Society;American Statistical Association, vol. 28(1), pages 138-156, March.
    18. Vincent Geloso & Chandler S. Reilly, 2025. "Revisiting Quebec's Quiet Revolution: A synthetic control analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(2), pages 548-579, May.
    19. Li, Kathleen T. & Bell, David R., 2017. "Estimation of average treatment effects with panel data: Asymptotic theory and implementation," Journal of Econometrics, Elsevier, vol. 197(1), pages 65-75.
    20. Haoge Chang, 2023. "Design-based Estimation Theory for Complex Experiments," Papers 2311.06891, arXiv.org, revised May 2025.

    More about this item

    Keywords

    International trade; Trade friction; Mediation analysis; Indirect effects; Lagged mediators.;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kan:wpaper:202512. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Professor Zongwu Cai (email available below). General contact details of provider: https://edirc.repec.org/data/deuksus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.