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GTAP Resource #5875

"Impacts of current trade tensions on developing countries "
by Maliszewska, Maryla and Israel Osorio Rodarte

Despite temporary respite, trade tensions between US and China continue to be high. Rising tariffs between the United States and China depress bilateral trade, disrupt global supply chains, and increase demand for substitutes from other countries. The biggest effects of trade tensions, however, are likely to come from depressed investment, as firms delay investments because of uncertainty over market access and negative impacts of trade tensions on economic growth.
Our analysis points to significant risks, if the trade tensions continue and trigger a reduction in investor confidence. Using a global trade computable general equilibrium model Linkage, we estimated the impact of trade tensions on global exports and income according to three different scenarios: (Scenario 1) China-US tariff increases on bilateral trade as of September 2018 covering US$253 billion of US imports from China and US$113 billion of Chinese imports from the US; (Scenario 2) a 25 percent surcharge on all products traded between the US and China; and (Scenario 3) a 25 percent tariff on all products traded between the US and China, plus a decline in investor confidence, resulting in a 0.5 percentage points drop in the investment to GDP ratio at a global level.
Under the first and second scenarios of tariff increases only, several developing countries would be expected to achieve some net gains in terms of total exports and income in line with the impacts observed to date. However, should tensions continue and result in a slowdown in investment and economic activity, the consequences would be severely negative for all countries. The loss of income would outweigh the short-term gains driven by higher exports to the US. Roughly half of the global income loss of 1.7 percent would be due to loss of income by developing countries (excluding China) and a third of the global exports decline of 2.7 percent would be due to the loss of exports of developing countries (excluding China).

Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Published
By/In: Presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw, Poland
Date: 2019
Version: 1
Created: Maliszewska, M. (4/15/2019)
Updated: Maliszewska, M. (7/15/2019)
Visits: 1,266
- Dynamic modeling
- Economic analysis of poverty
- Multilateral trade negotiations
- Not Applicable

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