Are Bilateral Trade Balances Irrelevant?

Global and National Environmental Impacts of the US–China Trade War

“…The trade war has shocked the trade and economic paradigm of the two countries and even the world and increased the uncertainty of global economic development. − Although many believe that the US–China trade war will depress global economic production and consumption, reduce related emissions, and benefit the global environment at large, − the prospective outcome could be complicated and uncertain. The policy shock imposed on trade could lead to changes in production volume and structure and then change the energy and resource use of one country and the world and result in changes in the global CO 2 and pollutant emissions and environmental quality. − The most direct and obvious impact in the short term is Brazil’s environment.…”

Bilateral Trade Imbalances

“…We discuss the differences between our approach and the analyses of Davis and Weinstein (2002) and Felbermayr and Yotov (2021) in more detail in Appendix A7. The second, by Eugster et al (2020), focuses on changes in bilateral imbalances over time. Consistently with our finding that bilateral trade-wedge asymmetries are fairly persistent, they find that these changes are primarily driven by macro factors (such as the macro trade balance).…”

“…However, the particular microfoundation of the gravity equation is not crucial for our purposes: in Appendix A.6 we show that we could obtain the same results by microfounding our gravity equation using the assumptions of Eaton and Kortum (2002). 25…”

“…where P nt denotes the price of final consumption in economy n and period t; R t is the return to wealth, which is equal across economies (as we discuss below); 25 Increasing-returns models such as Krugman (1980) and Chaney (2008) would also deliver the same structural gravity equation. However, the presence of market-size effects makes an analysis of model dynamics more intricate.…”

“…For given model parameters, there is a unique vector of equilibrium factor costs, {f n } n , up to a normalisation, which satisfies pricing conditions (20) and (21) and market-clearing conditions (24) and (25). Finally, we can express the steady-state real GDP per effective worker of n as…”