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China’s evolving role in global production networks: Implications for Trump’s trade war

Prema-chandra Athukorala

No 34, Discussion Paper Series from Department of International Economic Policy, University of Freiburg

Abstract: This paper examines China’s evolving role in global production networks and its implications for assessing the potential impact of the ‘trade war’ declared by President Trump. The analysis, which is based on a systematic disaggregation of trade based on global production sharing into components and final assembly, suggests that the Sino-US trade gap is a structural phenomenon driven by the pivotal role played by China within East Asia cantered production networks. The global competitiveness of US MNEs depends on their ability to use China as the production base for supplying the rest of the world, and China is now an important supplier of components used in US manufacturing. Given this intricate interdependence between the two economies within global production networks, attempt to impose punitive tariffs on China is bound to face formidable opposition from business interests in the United States. Even if the protectionist threat becomes a reality, the impact may not be as damaging as commonly thought because global production sharing has considerably weakened the link between relative prices and trade flows.

Keywords: China; global production networks; Sino-US trade dispute; punitive tariffs; MNEs (search for similar items in EconPapers)
JEL-codes: F13 F14 F59 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2017-06, Revised 2017-06
New Economics Papers: this item is included in nep-cna and nep-int
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