The response of the Chinese economy to the U.S.-China Trade War: 2018-2019

• Main Authors: CHANG, Pao-li, YAO, Kefang, ZHENG, Fan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: Chinese Economy; Tariff War; Elasticity Estimation; Regional Labor Market Adjustment; Welfare Analysis; Asian Studies; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2415; https://ink.library.smu.edu.sg/context/soe_research/article/3414/viewcontent/china_2021_5.pdf
• Institution: Singapore Management University

In this paper, we follow the micro-to-macro approach of Fajgelbaum et al. (2020) and analyze the impacts of the 2018–2019 U.S.-China trade war on the Chinese economy. We use highly disaggregated trade and tariff data with monthly frequency to identify the demand/supply elasticities of Chinese imports/exports, combined with a general equilibrium model for the Chinese economy (that takes into account input-output linkages, and regional heterogeneity in employment and sector specialization) to quantify the partial and general equilibrium effects of the tariff war at the product/sector/region/aggregate levels. This complements the studies that focus on the ex post response of the U.S. economy by Amiti, Redding and Weinstein (2019), Fajgel baum et al. (2020), and Cavallo et al. (2020).