Gains and Losses from Potential Bilateral US-China Trade Retaliation
Two closely related numerical general equilibrium models of world trade are used to analyze the potential consequences of US-China bilateral retaliation on trade flows and welfare. One is a conventional Armington trade model with five regions, the US, China, EU, Japan and Rest of the World, and calibrated to a global 2009 micro consistent data set. The other is a modified version of this model with monetary non neutrals and including China's trade surplus as an endogenous variable. Who may gain or loss from global trade conflicts spawned by adjustment pressures in the post crisis world is much debated. In a US-China trade conflict, Europe and Japan would seem gainers from preferential access to US and Chinese markets. The loss of markets would hurt the US, but moving closer to an optimal tariff could be the source of terms of trade gains. And the ease of substitution across trading partners practices would determine costs for China. Results from the conventional model suggest that retaliation between the two countries can be welfare improving for US as it substitutes expenditures into own goods and improve its terms of trade with non retaliatory regions, while China and non retaliatory regions maybe adversely affected. Results in the endogenous trade surplus model from the central case model specification ,however, suggest that both the US and the EU (the deficit regions) have welfare losses in most cases, while the surplus region, China, and the ROW have welfare gains. In both models, when the bilateral tariff rates are very high, gains accrue to the EU and Japan from trade diversion if the substitutions elasticities of imports are high. Costs will are borne by the US and China in lost exports, lowered terms of trade and adjustment costs at home.
|Date of creation:||Aug 2011|
|Publication status:||published as Dong, Yan & Whalley, John, 2012. "Gains and losses from potential bilateral USâChina trade retaliation," Economic Modelling, Elsevier, vol. 29(6), pages 2226-2236.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kuga, Kiyoshi, 1973. "Tariff retaliation and policy equilibrium," Journal of International Economics, Elsevier, vol. 3(4), pages 351-366, November.
- Whalley, John & Wang, Li, 2011.
"The impacts of Renminbi appreciation on trade flows and reserve accumulation in a monetary trade model,"
Elsevier, vol. 28(1-2), pages 614-621, January.
- Whalley, John & Wang, Li, 2011. "The impacts of Renminbi appreciation on trade flows and reserve accumulation in a monetary trade model," Economic Modelling, Elsevier, vol. 28(1), pages 614-621.
- Li Wang & John Whalley, 2007. "The Impacts of Renminbi Appreciation on Trades Flows and Reserve Accumulation in a Monetary Trade Model," NBER Working Papers 13586, National Bureau of Economic Research, Inc.
- Hamilton, Bob & Whalley, John, 1983. "Optimal tariff calculations in alternative trade models and some possible implications for current world trading arrangements," Journal of International Economics, Elsevier, vol. 15(3-4), pages 323-348, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17366. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.