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  5. The U.S.-China Trade War and Global Reallocations

The U.S.-China Trade War and Global Reallocations

  • Pablo Fajgelbaum
  • Pinelopi Goldberg
  • Patrick Kennedy
  • Amit Khandelwal
  • Daria Taglioni
American Economic Review: Insights (Forthcoming)

Abstract

The U.S.-China trade war created net export opportunities rather than simply shifting trade across destinations. Many “bystander” countries grew their exports of taxed products into the rest of the world (excluding U.S. and China). Country-specific components of tariff elasticities, rather than specialization patterns, drove large cross-country variation in export growth of tariff-exposed products. The elasticities of exports to U.S.-China tariffs identify whether a country’s exports complement or substitute U.S. or China and its supply curve’s slope. Countries that operate along downward-sloping supplies whose exports substitute (complement) U.S. and China are among the larger (smaller) beneficiaries of the trade war.

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