Global trade tensions have worsened and developing countries stand to see depressing investments as global uncertainty grows. On July 6, the United States implemented a first round of tariffs on 34 billion dollars of imports from China, as part of 50 billion dollars in announced tariffs; China retaliated with tariffs on an equivalent amount of imports from the United States. Both countries have announced the potential for additional tariffs. The new tariffs will depress bilateral trade, disrupt global supply chains, and increase demand for substitutes from other countries. Because both countries are large, there will also be terms of trade effects. The biggest effects of tariff escalation on developing countries are likely to come from depressed investment, as firms delay investments because of uncertainty over market access. This note assesses the implications of tariffs between China and the United States on developing countries, using a Computable General Equilibrium (CGE) Model, under three scenarios. The analysis shows that a US-China tariff escalation could reduce global exports by up to 3 percent (674 billion dollars) and global income by up to 1.7 percent (1.4 trillion dollars) with losses across regions.
Details
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Author
Freund,Caroline, Ferrantino,Michael Joseph, Maliszewska,Maryla, Ruta,Michele
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Document Date
2018/07/01
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Document Type
Brief
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Report Number
128644
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2018/07/19
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Disclosure Status
Disclosed
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Doc Name
Impacts on Global Trade and Income of Current Trade Disputes
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Keywords
electronic equipment; terms of trade loss; terms of trade effect; machinery and equipment; global export; disruption of trade; import of goods; investor confidence; transport equipment; regional trade agreement; import of service; global value chain; trade in services; demand for substitutes; global supply chain; trade diversion effect; dispute settlement body; regional value chain; increase tariff; tariff escalation; global income; Natural Resources; income effect; Agriculture; agricultural product; consumer goods; business service; energy product; financial crisis; agricultural good; tariff line; metal product; bilateral trade; global business; ad valorem; managed trade; income loss; sectoral impacts; financial market; negative effect; tariff import; trading partner; global imports; multinational companies; multinational company; political stability; tariff equivalent; standard deviation; tariff change; policy scenario; import sources; depressed investment; negative shock; long-term effect; public input; legal ground; transportation equipment; plastic products; intellectual property; policy uncertainty; manufacturing sector; transport agreement; tariff policy; party country; multilateral fora; multilateral trade; economic liberalization; electrical equipment; trading practice; trading arrangement; increased investment; agricultural output; income decline; medical equipment
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Citation
Freund,Caroline Ferrantino,Michael Joseph Maliszewska,Maryla Ruta,Michele
Impacts on Global Trade and Income of Current Trade Disputes (English). MTI Practice Note,no. 2 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/685941532023153019/Impacts-on-Global-Trade-and-Income-of-Current-Trade-Disputes