Yuqing Xing, 11 November 2019

In order to pursue ‘fair trade’, the Trump administration has imposed a punitive 25% tariff on $250 billion’s worth of Chinese goods. However, conventional trade statistics greatly exaggerate the US trade deficit with China. This column uses the iPhone as an example to demonstrate how the trade deficit is inflated and why value-added should be used to assess the bilateral trade balance. If multinational enterprises, including Apple, shift part of their value chains out of China, China may no longer play a central role in global value chains targeting the US market. Depreciation of the yuan will be insufficient to counter the effect. 

Willem Thorbecke, 06 November 2019

As the trade surpluses of East Asian countries have continued to exist in regional value chains despite the US-China trade war, one possible tool such economies could employ are currency appreciations. This column shows how exchange rates in upstream countries affect China’s exports. No single economy wants to appreciate its currency against the US dollar for fear of losing competitiveness, but a concerted effort to prioritise regional currencies could benefit the set of countries as a whole.

Chang Sun, Zhigang Tao, Hongjie Yuan, Hongyong Zhang, 03 November 2019

The trade war between the US and China has had impacts on other countries – including Japan, one of the most important trading partners of both countries. The column uses quarterly sales data and stock market returns to show that the operations in China of Japanese MNCs have been negatively affected by the trade war, especially when Chinese affiliates rely heavily on trade with North America. This has led to a reduction in their stock prices. 

Michael Bordo, Mickey Levy, 18 October 2019

The history of tariffs and immigration and capital barriers provides clear lessons of the potentially sizeable economic costs of anti-globalisation policies. This column describes how the US-China tariff war and policy-related uncertainties are harming economic performance, and are also distorting the Federal Reserve’s monetary policy and undermining its credibility and independence. Tariffs and discretionary monetary policy are a toxic mix, and the authors encourage a de-escalation of burdensome barriers to trade and urge the Fed to adopt a systematic, rules-based approach to monetary policy.

Scott Baker, Nicholas Bloom, Steven Davis, 17 September 2019

Tariff threats, hikes, and retaliations have become a major source of economic uncertainty and stock market volatility. This column draws on three initiatives to demonstrate that recent rise in trade policy uncertainty, driven by the US withdrawal from the Trans-Pacific Partnership, tariff hikes on US steel and aluminium imports, ongoing Brexit uncertainty, and escalating US-China trade tensions, is extraordinary by several metrics. 

Daniel Gros, 09 September 2019

Traditional analysis of tariffs in a partial equilibrium setting can tell us much about the welfare consequences of the US-China trade war. The column argues that, as tariffs ratchet up, welfare costs for both sides increase disproportionately. The cost of trade diversion in the US to less-efficient suppliers likely overwhelms any terms-of-trade gain the US might enjoy. In all cases, exporters in the rest of the world benefit.

Chad Bown, 22 July 2019

Xuepeng Liu, Huimin Shi, 11 July 2019

The US-China trade war has continued for almost a year, but its effectiveness in preventing some Chinese origin products reaching the US may not be as great as it seems. This column shows how trade re-routing has been used in the past to circumvent antidumping duties in the context of trade tariffs. Firms may be able to avoid tariffs by sending their products to a third country, where the goods are reissued certificates of origin and then sent to the final destination country without being subject to the same tariffs.

Meredith A. Crowley, Ralph Ossa, Heiwai Tang, 20 June 2019

A new book from the CEPR argues that the current trade war is a long-term danger to all economies, not just those of the US and China. Editor Meredith Crowley of the University of Cambridge and two of the authors tell Tim Phillips why prospects for the world economy are 'grim'.

Meredith A. Crowley, 30 May 2019

As a trade war of unprecedented scope and magnitude engulfs the world’s two largest economies, this column introduces a new Vox eBook that seeks to shed light on the origins of the conflict, the current impacts on economic activity around the world, and the likely consequences for the future of globalisation. It concludes that the prospects for the future of the multilateral trading system look grim.  

Wilko Bolt, Kostas Mavromatis, Sweder Van Wijnbergen, 25 April 2019

Increasing protectionism will slow down world trade and may dampen global economic growth. This column examines the global macroeconomic consequences of a major trade conflict between the US and China, and shows that the two countries would be the biggest losers from a 10% ‘tit-for-tat’ trade war between them. As long as it does not get involved in the conflict, the euro area may temporally gain from trade diversion, as competitiveness improves and imports from regions whose exports are blocked elsewhere become cheaper.

Thiemo Fetzer, Carlo Schwarz, 23 April 2019

Tariff retaliation is widely believed to be politically motivated. This column presents evidence that retaliation against the Trump administration's tariff hikes seems to be systematically targeted against the Republican voter base. China appears to have been able to achieve a high degree of political targeting but likely harmed its own economy by targeting agricultural goods for which the US is a major supplier. The EU, on the other hand, appears to be more successful in navigating the trade-off. It also finds some evidence suggesting that Republican candidates fared worse in the mid-term elections in the US counties most exposed to retaliation.

Cecilia Bellora, Lionel Fontagné, 22 April 2019

Since 2018, the US administration has implemented several measures limiting free trade with China and other countries. Using cross-country data and a general equilibrium model, this column argues that a trade war hurts not only the targeted countries but also the country imposing the tariffs. Global value chains prompt countries to decrease tariffs when the domestic content of foreign-produced final goods and the imported content of domestic production of final goods are high. Once imposed, tariffs have an indirect effect on third sectors and countries through global value chains.

Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy, Amit Khandelwal, 07 November 2019

The 2018 tariff hikes reversed a decades-long push by the US for lower global trade barriers around the world. This column examines the impact of the resulting trade war on the US economy. It estimates a $51 billion annual loss to US consumers and firms from higher import prices, with an aggregate annual loss of $7.2 billion when producer gains and tariff revenues are factored in. It also argues that US tariffs protected politically competitive counties, whereas retaliations by other nations targeted strongly Republican counties.

Antoine Berthou, Caroline Jardet, Daniele Siena, Urszula Szczerbowicz, 08 February 2019

Escalating tensions between the US and its trading partners have made a global trade war more likely. In addition to the direct effect due to the increase in tariffs, a trade war may also affect GDP via indirect channels, such as a drop in productivity due to uncertainty and changes in the production environment. Using a multi-country model, this column shows that a global and generalised 10 percentage point increase in tariffs could reduce the level of global GDP by almost 2.0% on impact and up to 3.0% after two years, when all the additional indirect channels materialise. 

Steven Brakman, Harry Garretsen, Tristan Kohl, 01 December 2018

Massimiliano Calì, 16 October 2018

The US-China trade war has rapidly escalated, promising to disrupt trade flows between the two countries and beyond. This column provides the first estimates of trade and investment effects of the trade war on East Asia, one of the most exposed regions. By combining trade and tariff data, it provides some order of magnitude of the expected effects and identifies the possible winners and losers from the trade war in the region.

Eric Bond, Mario Crucini, Tristan Potter, Joel Rodrigue, 27 September 2018

The Trump administration’s recent tariff increases have prompted comparisons to interwar tariff history. This column investigates tariffs during this period, drawing out lessons on their macroeconomic impacts for the US and its trade partners. The recessionary impact of recent tariffs is likely to be smaller and less widespread than those imposed during the interwar period, provided that tariff levels don’t escalate too dramatically through retaliation.

Agnès Bénassy-Quéré, Matthieu Bussière, Pauline Wibaux, 16 August 2018

Recent events on the international stage have reignited the debate on trade and currency wars. This column compares two forms of non-cooperative policies – import tariffs and currency devaluations – within a single framework. The results show that tariffs and devaluations do not have equivalent effects on trade flows. A 1% depreciation of the importer's currency reduces imports by around 0.5% in current dollars, whereas an increase in import tariffs by 1 percentage point reduces imports by around 1.4%.

Yi Huang, Chen Lin, Sibo Liu, Heiwai Tang, 10 August 2018

Tariffs intended to reduce competition from foreign firms can backfire by also raising the costs of imported inputs for domestic firms. This column examines the market responses to the Trump administration’s initial and subsequent announcements of tariffs on imports from China. US firms that are more dependent on exports to and imports from China experienced lower stock and bond returns but higher default risks around the date of the announcement. Firms’ indirect exposure to US-China trade through domestic input-output linkages affects their responses to the announcements. 

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