Hites Ahir, Nicholas Bloom, Davide Furceri, 18 May 2021

The latest update of the World Uncertainty Index indicates that global uncertainty has fallen back to its long-run average after reaching a historical high in 2020. This column describes how this is driven by a significant decline in two key drivers of global uncertainty over the last few years: US–China trade tensions and Brexit negotiations. A sub-index of the World Uncertainty Index, the World Pandemic Uncertainty Index, reveals that uncertainty related to COVID-19 is also starting to subside, especially in developed countries where vaccines rollout has started to pick up. Given this, and because US–China trade and Brexit tensions impacted developed countries more, the authors observe a more salient decline in uncertainty in developed countries than in developing ones.

Caroline Freund, Maryla Maliszewska, Aaditya Mattoo, Michele Ruta, 18 March 2020

Should the China-US trade agreement prompt relief or concern? This column argues that the answer depends on how China implements the agreement. Model simulations suggest that both countries would be better off under this ‘managed trade’ agreement than if the trade war had escalated. However, compared to the policy status quo, China is worse off and so is the rest of the world because of trade diversion. China can reverse those losses if instead of granting the US privileged entry, it opens its market for all trading partners.

Peter Egger, Jiaqing Zhu, 09 January 2020

The US and China have been exchanging threats and imposing tariffs in a ‘trade war’ since early 2018. Sound statistical and holistic economic analysis of the trade dispute’s consequences is difficult due to data limitations. This column scrutinises global stock market responses to assess the effects of the trade war and finds that, on average, the US and Chinese tariffs have directly hurt targeted firms/sectors abroad as intended, but they have also hurt firms at home. It also reveals unintended effects on third parties, mediated by global value chain interdependencies.

Michael Waugh, 19 November 2019

Consumers expect to bear the costs of trade wars through higher prices and reductions in variety. This column examines a different hardship of the US-China trade war: the retaliatory tariffs that affect income and production opportunities for directly impacted farmers and workers. Unlike price effects, which are spread across the population, this ‘labour income channel’ is concentrated and differs across US counties. Those who lost their position of comparative advantage for the Chinese market due to tariffs bear this burden of the trade war alone. 

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. 

Chad Bown, Jennifer Hillman, 04 November 2019

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. 

Peter Petri, Michael Plummer, 30 October 2019

Jayant Menon, 27 September 2019

The impact of a simple 25% trade tariff can go far beyond the costs of directly impacted goods. This column shows that seemingly small tariffs can substantially disrupt global value chains, both through the difference between nominal and effective tariff rates and the relative costs of relocation and transhipment, and also because of how the trade dispute is being perceived. If it is seen as a symptom of an enduring geopolitical struggle for global economic dominance, then it could recur. 

Simon Evenett, Johannes Fritz, 01 July 2019

What is the practical and intellectual significance of the Sino-US tariff hikes of 2018? This column, taken from a recent Vox eBook, argues that the uncertainty engendered by the trade tensions is likely to have had a larger economic impact than the direct restrictive effect on international trade. The intellectual significance, meanwhile, lies in prompting the questions of what actions constitute a trade war and of whether trade policy analysts, in focusing on instances of brazen protectionism, have failed to spot more far-reaching commercial policy developments.

Yi Huang, Chen Lin, Sibo Liu, Heiwai Tang, 25 June 2019

Recent studies have found that US tariffs on China have led to a significant welfare loss and significant increases in consumer prices in the US. This column, taken from a recent Vox eBook, studies firms’ equity market responses to the various tariff announcements by the US and Chinese governments in 2018 and 2019. The responses demonstrate that the structure of US–China trade is much more complex than the simplistic view of global trade that prompted the trade war, and that the winners and losers in the war depend on firms’ positioning in, and exposure to, the global value chains shared by the two countries.  

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.  

Jeffrey Frankel, 29 March 2019

The supposed deadline for a conclusion to China–US trade negotiations has been postponed until late April. This column argues that the structural reform aspect of the negotiations is reminiscent of US negotiations with Japan three decades ago, and that the Structural Impediments Initiative between the two countries could, in theory, serve as a useful model for the current US–China negotiations. The question is whether Presidents Trump and Xi have as firm a grasp on economic principles as their predecessors. 


CEPR Policy Research