US–China rivalry: The macro policy choices

Abstract

Stylised representations of recent US and Chinese tax reforms, tariffs against imports and alternative Chinese monetary targeting are examined using a calibrated global macro model that embodies both trade and financial interdependencies. For both countries, unilateral capital tax relief and bilateral tariffs are shown to be ‘beggar thy neighbor’ policies. As large economies, both enjoy ‘optimal tariffs’, even bilaterally, though net outcomes are shown to depend on the allocation of revenues. Bilateral tariffs are most advantageous for the US if the additional revenue finances indirect tax relief. Once US bilateral tariffs are imposed, China is a net loser irrespective of its policy response, though a currency float is shown to cushion the effects on its GDP in the short run. Equilibria in normal form non‐cooperative tariff games have the US imposing tariffs while China liberalises.

China's Transition to a New Phase of Development

“…What does a financially integrated Chinese market mean for the global economy? Tyers and Zhou (2020) show that China's financial openness, as measured by crossborder flows and asset ownership, peaked during its growth surge in the 2000s, as did downward pressure on global interest rates and prices. Globally, China's growth surge raised asset prices, reduced yields and bolstered deflationary pressures, while improving aggregate economic welfare.…”

A Bamboo Curtain: The Grim Australian Consequences of China Conflict

“…Endnotes 1. See, for example, the analysis of China-US trade tensions by Tyers and Zhou (2020). Golley et al (2018).…”

Monetary Policy Regimes in Small Open Economies: The Case of Sri Lanka*

“…Progenitors includeTyers (2001),Tyers and Zhou (2020) andAzwar and Tyers (2020), although these models were not applied stochastically, using Monte Carlo simulation.…”