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Article: Trade wars and industrial policy competitions: Understanding the US-China economic conflicts

TitleTrade wars and industrial policy competitions: Understanding the US-China economic conflicts
Authors
Issue Date2-Nov-2023
PublisherElsevier
Citation
Journal of Monetary Economics, 2024, v. 141, p. 42-58 How to Cite?
Abstract

We provide the first quantitative evaluation of the impacts and interactions of the US-China trade wars and industrial policy competitions. We extend the model in Caliendo and Parro (2015) by incorporating sectoral external economies of scale. We find that (i) under our baseline calibration of scale economies, the “Made-in-China 2025” (“MIC 2025”) subsidies tend to improve the welfare of both China and the U.S.; (ii) the US gains from Trumpian tariffs if China does not retaliate, and the gain is larger if China had implemented the “MIC 2025” project; (iii) in a non-cooperative tariff game targeting on high-tech industries supported by the “MIC 2025”, both China and the U.S. impose high tariffs and endure welfare losses; and (iv) if it is feasible for the U.S. to subsidize its own high-tech industries, the U.S. would reduce its tariffs on high-tech imports from China and benefit from its own industrial subsidies. These results (i) provide a rationale for trade wars and industrial policy competitions between the U.S. and China and (ii) suggest that industrial subsidies, if properly implemented, may generate less distortion than import tariffs as a means of international competition.


Persistent Identifierhttp://hdl.handle.net/10722/338996
ISSN
2021 Impact Factor: 4.630
2020 SCImago Journal Rankings: 4.988

 

DC FieldValueLanguage
dc.contributor.authorJu, Jiandong-
dc.contributor.authorMa, Hong-
dc.contributor.authorWang, Zi-
dc.contributor.authorZhu, Xiaodong-
dc.date.accessioned2024-03-11T10:33:04Z-
dc.date.available2024-03-11T10:33:04Z-
dc.date.issued2023-11-02-
dc.identifier.citationJournal of Monetary Economics, 2024, v. 141, p. 42-58-
dc.identifier.issn0304-3932-
dc.identifier.urihttp://hdl.handle.net/10722/338996-
dc.description.abstract<p>We provide the first quantitative evaluation of the impacts and interactions of the US-China trade wars and industrial policy competitions. We extend the model in Caliendo and Parro (2015) by incorporating sectoral external economies of scale. We find that (i) under our baseline calibration of scale economies, the “Made-in-China 2025” (“MIC 2025”) subsidies tend to improve the welfare of both China and the U.S.; (ii) the US gains from Trumpian tariffs if China does not retaliate, and the gain is larger if China had implemented the “MIC 2025” project; (iii) in a non-cooperative tariff game targeting on high-tech industries supported by the “MIC 2025”, both China and the U.S. impose high tariffs and endure welfare losses; and (iv) if it is feasible for the U.S. to subsidize its own high-tech industries, the U.S. would reduce its tariffs on high-tech imports from China and benefit from its own industrial subsidies. These results (i) provide a rationale for trade wars and industrial policy competitions between the U.S. and China and (ii) suggest that industrial subsidies, if properly implemented, may generate less distortion than import tariffs as a means of international competition.</p>-
dc.languageeng-
dc.publisherElsevier-
dc.relation.ispartofJournal of Monetary Economics-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleTrade wars and industrial policy competitions: Understanding the US-China economic conflicts-
dc.typeArticle-
dc.identifier.doi10.1016/j.jmoneco.2023.10.012-
dc.identifier.volume141-
dc.identifier.spage42-
dc.identifier.epage58-
dc.identifier.eissn1873-1295-
dc.identifier.issnl0304-3932-

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