Assessing the impacts of the US-China trade war on Asian economies

• Main Author: CHEN, Ruoqing
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: International Trade; The US-China Trade War; Asian Economics; Asian Studies; International Economics
• Online Access: https://ink.library.smu.edu.sg/etd_coll/598; https://ink.library.smu.edu.sg/context/etd_coll/article/1596/viewcontent/GPEC_AY2022_MbR_Chen_Ruoqing.pdf
• Institution: Singapore Management University

The ongoing trade tensions between the United States and China have reverberated globally, sparking concerns about economic stability and growth. What are the most affected industries and economies among Asia? What will happen if the US and China further raise their tariffs? Are there any useful trade policy adjustments for the Asian economies to improve their lots under the not-so-optimistic world trade climate? This paper employs a multi-country, multi-industry, general equilibrium model to analyze the impacts of the US-China trade war and potential further tariff war on 13 Asian regions across 20 industries in the year 2017. The results indicate that, on average, all of these Asian economies (other than China) experience a modest welfare gain of 0.2 percent under the US-China trade war. Furthermore, analysis suggests that if the US and China were to raise their bilateral tariffs further to their bilaterally optimal levels, imputed to be at an average tariff of 74 percent, the other Asian economies would see an average political welfare gain of 0.54 percent. In addition, this paper imputes potential trade policies that the Asian economies could adopt to navigate the heightened trade tensions, particularly those stemming from the US-China trade war. For instance, the paper shows that zero tariffs between Singapore and Japan could benefit both countries in the event of an intensified trade dispute, while Taiwan and Korea could also benefit from a free trade agreement. Furthermore, the study highlights the potential benefits of a free trade agreement between China and Vietnam amid the ongoing trade conflict and any potential escalation.