ABSTRACT
Chapter 4 aims to make a comprehensive assessment of economic consequences of the US–China trade war. It looks at relevant economic variables at various levels – macro, meso and micro levels – and from different perspectives – trade and investment diversion, macroeconomic performance and firm behaviour. It seems that, due to the diverging economic and trade structures of China and the United States, ramifications of the trade war differ. For China, the impact of “export direction” is primary, as manifested in the reduced exports, business confidence, capital formation and economic growth. Although the Phase One agreement has been signed and the US–China negotiations have moved into a new stage, most special tariffs on Chinese exports remain. For the United States, by contrast, the impact of “import direction” dominates, reflected in how tariffs affect import prices and consumer welfare, while the “export direction” shock affects a rather limited number of areas, such as agriculture. The chapter focuses on the two participating countries, but also addresses the implications of the US–China trade war from a broader perspective, exploring what it means for third party countries, the world economy and the global system at large.
