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Economic Impacts of the US–China Trade War on the Asian Economy: An Applied Analysis of IDE-GSM

Satoru Kumagai, Toshitaka Gokan, Kenmei Tsubota, Ikumo Isono and Kazunobu Hayakawa ()

Journal of Asian Economic Integration, 2021, vol. 3, issue 2, 127-143

Abstract: In this article, we attempt to estimate the economic impacts of the US–China trade war that began in 2018. We used IDE-GSM, a computational general equilibrium simulation model, to estimate the economic impacts of a ‘full-confrontation’ scenario wherein both countries impose 25% additional tariffs on all goods imported from each other for 3 years 2019 onwards. In our calculation, the economic impact for the United States is −0.4% and −0.5% for China. Some Asian countries benefit from the trade war. As far as it remains bilateral, the trade war is only an issue for the concerned parties. We also ran the US–world trade war scenario, wherein the United States and all other countries impose a 25% additional tariff on all goods. The negative impact on the global economy is –0.8%, much more significant than the 0.1% impact from the US–China trade war. Thus, it is clear that the world cannot afford to engage in a multilateral trade war. JEL Codes: C68, F13

Keywords: US–China trade war; IDE-GSM; simulation analysis; CGE model (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jfasei:v:3:y:2021:i:2:p:127-143

DOI: 10.1177/26316846211032296

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