IPE_3
Donald Trump’s Trade War:
1. Background and Context:
○ Contrasting views on trade wars: Chinese President Xi Jinping called them
unwinnable, whereas Donald Trump believed they were "easy to win."
○ Trump increased tariffs on Chinese imports in May 2019, targeting
approximately $420 billion in U.S. imports, primarily from China.
2. Economic Costs and Impacts:
○ Average U.S. tariffs increased significantly, affecting solar panels, washing
machines, steel, and aluminum.
○ Economic costs for the U.S. ranged between $8.2 billion and $23.8 billion
in 2018 alone (Amiti et al., 2019), with consumer prices rising notably.
○ Studies like Fajgelbaum et al. (2020) showed aggregate welfare losses of $7
billion(0.04% gdp) to $25 billion(0.13% gdp) annually, with key effects in
Rust Belt states(michigan, ohio, pennsylvania) and regions relying on
agricultural exports.
3. Retaliation by Trade Partners:
○ China imposed tariffs on $100 billion worth of U.S. exports, targeting
agricultural goods.
○ Fetzer and Schwarz (2021) Different trade partners, including the EU,
strategically retaliated to minimize their economic costs while increasing
political pressure on Trump-aligned regions.
4. Specific Findings: Flaaen et al(2020)
○ Washing machines and related products saw price hikes (12% for washers,
indirectly for dryers).
○ Retaliatory tariffs disproportionately affected Republican-leaning counties.
○ The trade war resulted in no substantial terms-of-trade gains, with foreign
exporters maintaining prices.
Broader Implications:
1. Impact on China:
○ Chinese regions, particularly manufacturing hubs like Suzhou, saw
economic declines as measured by reduced night-light intensity (Chor and
Li, 2021).
2. Post-Trade War Developments:
○ Though the Phase One Agreement was signed in 2020, tariffs remained
high under the Biden administration as of 2023, indicating the trade war is
not entirely resolved.
3. Shifts in Trade Composition:
○ U.S. imports from China returned to pre-trade war levels in value but
shifted in composition:
■ Heavily targeted goods declined (~20%).
Donald Trump’s Trade War:
1. Background and Context:
○ Contrasting views on trade wars: Chinese President Xi Jinping called them
unwinnable, whereas Donald Trump believed they were "easy to win."
○ Trump increased tariffs on Chinese imports in May 2019, targeting
approximately $420 billion in U.S. imports, primarily from China.
2. Economic Costs and Impacts:
○ Average U.S. tariffs increased significantly, affecting solar panels, washing
machines, steel, and aluminum.
○ Economic costs for the U.S. ranged between $8.2 billion and $23.8 billion
in 2018 alone (Amiti et al., 2019), with consumer prices rising notably.
○ Studies like Fajgelbaum et al. (2020) showed aggregate welfare losses of $7
billion(0.04% gdp) to $25 billion(0.13% gdp) annually, with key effects in
Rust Belt states(michigan, ohio, pennsylvania) and regions relying on
agricultural exports.
3. Retaliation by Trade Partners:
○ China imposed tariffs on $100 billion worth of U.S. exports, targeting
agricultural goods.
○ Fetzer and Schwarz (2021) Different trade partners, including the EU,
strategically retaliated to minimize their economic costs while increasing
political pressure on Trump-aligned regions.
4. Specific Findings: Flaaen et al(2020)
○ Washing machines and related products saw price hikes (12% for washers,
indirectly for dryers).
○ Retaliatory tariffs disproportionately affected Republican-leaning counties.
○ The trade war resulted in no substantial terms-of-trade gains, with foreign
exporters maintaining prices.
Broader Implications:
1. Impact on China:
○ Chinese regions, particularly manufacturing hubs like Suzhou, saw
economic declines as measured by reduced night-light intensity (Chor and
Li, 2021).
2. Post-Trade War Developments:
○ Though the Phase One Agreement was signed in 2020, tariffs remained
high under the Biden administration as of 2023, indicating the trade war is
not entirely resolved.
3. Shifts in Trade Composition:
○ U.S. imports from China returned to pre-trade war levels in value but
shifted in composition:
■ Heavily targeted goods declined (~20%).
