Shooting Oneself in the Foot? Trade War and Global Value Chains

Bellora, Cecilia; Fontagné, Lionel

doi:10.2139/ssrn.3526944

Cited by 39 publications

(32 citation statements)

References 35 publications

(29 reference statements)

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“…Alternatively, my finding contradicts Bellora (2019) expecting an increase in the prices of producer cost in the US which will translate into the loss of market shares of US firms on the global export market in addition to a loss in US GDP for about 0.3%. This could be valid for firms that import intermediate goods from China while assuming no equal alternative.…”

Section: Discussioncontrasting

confidence: 81%

“…Almost the same finding was concluded from the Ricardian theory of comparative advantage, in the sense that the imposition of tariff over the trading nations will reduce specialization further and terms of trade will be renegotiated (shift leftward) and therefore a lower indifference curve. According to Bellora (2019) by using the dynamic general equilibrium model featuring global value chain, an expected increase in the prices of producer cost in the US which will translate into a loss of market shares of US firms on the global export market. Furthermore, a loss in GDP is expected for both nations for about 0.3%.…”

Section: Literature Reviewmentioning

confidence: 99%

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The Aftermath of the Tariff War on China

Bitar¹

2020

ASS

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Will the US sustain its economy after the tariff war with China, or will the economy regress? This paper offers a conceptual framework, based on the tenets of New-Keynesian theory, to answer this question. I anticipate that the tariff will have a positive effect on the GDP of the US economy in the short run while prices will rise. When adding the most recent reforms of interest cut by the Fed to 1.75% in September (2019) the model concludes a better outcome. Followed by an expansionary monetary policy by reducing the interest rate, the aftermath of the tariff war on China seems to have a positive impact on the US income and productivity. Obviously, some critics to the Trump Administration indeed shed light on the curtailed global and US social welfare that is caused by the inflationary effect of the tariff war, in addition to the deteriorating conditions for some trading sectors in the US which would certainly lead to unemployment. But the benefits to the US economy that are translated by the New-Keynesian theoretical framework show a positive impact on US production, employment, and GDP.

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Section: Discussioncontrasting

confidence: 81%

Section: Literature Reviewmentioning

confidence: 99%

The Aftermath of the Tariff War on China

Bitar¹

2020

ASS

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“…Imposing protectionist measures in a globalized world is like shooting oneself in the foot (Bellora & Fontagne, 2019). This metaphor aligns with our findings on the effects of a potential US new tariff on the European automotive industry.…”

Section: Introductionsupporting

confidence: 88%

Weaponized trade policy: the impact of US tariffs on the European automobile sector

Llano

Pérez

Khatabi

et al. 2020

Economic Systems Research

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With trade tensions running high, the Trump Administration is considering new tariffs on imported automobiles, and the main target would be the European Union, traditionally America's closest ally. In this paper we combine disaggregated models to estimate the impact of these tariffs worldwide, and especially on Spain. First, a trade-policy simulation model computes the potential effects worldwide. Then we plug these into the World Input-Output Database, obtaining the inter-sectoral effects of the tariffs on Europe and the rest of the world. Finally, we insert these results into the Spanish interregional Input-Output Tables, obtaining final effects for Spanish regions via their inter-sectoral relations with the European Union and the rest of the world. By our calculation, the new US auto tariffs could end up destroying 10,400 jobs in Spain alone and 567,000 jobs worldwide. Moreover, they might have unexpected consequences, affecting, Spanish regions and sectors that just indirectly depend on the automobile industry.

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“…The aggregate impacts could be larger under tariff uncertainty (Handley and Limão, 2017) or different assumptions on the input-output structure (Antràs and De Gortari, 2017;Baqaee and Farhi, 2019). See Freund et al (2018), Altig et al (2018) and Bellora and Fontagné (2019) for analyses that incorporate some of these forces in the context of the 2018 trade war. gain of $0.5 billion.…”

Section: Gdpmentioning

confidence: 99%

The Return to Protectionism

Fajgelbaum¹,

Goldberg²,

Kennedy³

et al. 2019

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After decades of supporting free trade, in 2018 the U.S. raised import tariffs and major trade partners retaliated. We analyze the short-run impact of this return to protectionism on the U.S. economy. Import and retaliatory tariffs caused large declines in imports and exports. Prices of imports targeted by tariffs did not fall, implying complete pass-through of tariffs to duty-inclusive prices. The resulting losses to U.S. consumers and firms who buy imports was $51 billion, or 0.27% of GDP. We embed the estimated trade elasticities in a general-equilibrium model of the U.S. economy. After accounting for tariff revenue and gains to domestic producers, the aggregate real income loss was $7.2 billion, or 0.04% of GDP. Import tariffs favored sectors concentrated in politically competitive counties, and the model implies that tradeable-sector workers in heavily Republican counties were the most negatively affected due to the retaliatory tariffs.

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Shooting Oneself in the Foot? Trade War and Global Value Chains

Cited by 39 publications

References 35 publications

The Aftermath of the Tariff War on China

The Aftermath of the Tariff War on China

Weaponized trade policy: the impact of US tariffs on the European automobile sector

The Return to Protectionism

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