Traders' dilemma: Developing countries' response to trade wars

Abstract

Since the beginning of 2018, the United States has introduced new tariffs on imports from several trading partners, citing either national security concerns, unfair trade practices, or serious injury to domestic industries. Initially, protectionist measures targeted specific products such as washing machines, solar panels, steel and aluminium and were imposed on imports from most trading partners. Additional tariffs were imposed on imports of certain products from China, which, following a tit-fortat escalation of the dispute, now cover close to all bilateral trade between the two countries. 1 If threatened tariffs on automobiles and parts materialise, they will cause serious disruptions to tightly integrated regional and global value chains (GVCs) and, together with previous measures, impact close to one-third of all US imports.Faced with protectionist measures, numerous trading partners (such as China, Canada, Mexico, EU and Turkey) retaliated against higher US tariffs, while others (such as the Republic of Korea and India) did not. 2 In fact, apart from the trade disputes with the United States, there is no evidence of a worldwide increase in the number of protectionist measures. During the same period, the average number of trade-restrictive measures implemented by G20 economies has declined and remained below the 2012-15 trends (WTO, 2018). Most major economies have continued liberalisation efforts, pursuing market access opportunities under regional trade agreements (RTAs). Since the beginning of 2017, there have been 10 RTAs that entered into force, such as those between the EU and Canada, Canada and Ukraine, China and Georgia, and the EU and many countries. After US withdrawal from 1 As Bown (2019) notes, China's average tariff on US goods was to increase to 25.9% in December 2019, in contrast to the average tariff of 8% in January 2018, before the trade war. Likewise, the average US tariff on goods from China increased to 26.6% in December 2019, up from 3.1% before the trade war.2 See Bown & Kolb (2020) for an up-to-date description of the U.S. trade war.

The American–China Trade War and Spillover Effects on Value-Added Exports from Indonesia

“…Still, the impact on Indonesia is smaller than indicated theoretically, though in line with previous studies [15,25,26]. The participation of Indonesia in GVC linked to the US is small, suggesting that even in the event of trade diversion, gains for Indonesia may be small [6], requiring substantial extra efforts from Indonesian exporters to benefit from it [25,48]. Trade diversion gains via indirect partners (Korea, Japan, India, or ASEAN) may offer larger gains [11].…”

The US-China Trade War and Global Reallocations

“…Increasing exports to the rest of world could reflect that supply chains of tariffed HS6 products become more dispersed across countries and heavily use their own output as input.4 Reyes-Heroles et al(2020) shows that a framework with capital accumulation and input-output linkages predicts heterogeneous impacts of tariffs depending on factor intensities Devarajan et al (2021). use a CGE model to examine trade diversion from the trade war.5 LikeCostinot et al (2019), we do not quantitatively estimate the scale parameters, but rather check whether supplies are downward sloping.…”

Trade policy in a sovereign Palestinian State: What are the options in a final settlement?

“…Simulation models typically have a strong microeconomic foundation, depict changes in trade endogenously and derive welfare implications (Cardenete et al, 2012). Among simulation models, CGE models have been widely used to estimate the effects of trade agreements on trade and the economy as a whole (see Anderson, 2003; De Melo, 2015; and Devarajan et al, 2021 for selected CGE applications to trade policy). However, the parameterisation of CGE models is often challenged by the lack of estimated country/region specific elasticities (Bacchetta et al, 2012).…”