I have not yet seen a good estimate of the impact of Trump's trade war on supply-side growth. Half a percentage point per year is what my own back-of-the-envelope guesses are suggesting to me now, but I have no confidence in them. I would really love to see a comprehensive assessment that I could trust: Jayant Menon: The Knock-On Consequences Of The Us-China Trade Tariffs on Global Value Chains https://voxeu.org/article/knock-consequences-us-china-trade-tariffs-global-value-chains: "The impact of a simple 25% trade tariff can go far beyond the costs of directly impacted goods. This column shows that seemingly small tariffs can substantially disrupt global value chains, both through the difference between nominal and effective tariff rates and the relative costs of relocation and transhipment, and also because of how the trade dispute is being perceived. If it is seen as a symptom of an enduring geopolitical struggle for global economic dominance, then it could recur.... Effective rather than the nominal tariff rate, and the perception that the dispute will not end with the trade war... explain how a relatively small tariff has permanently fractured GVCs. The recent escalation in the trade war, both in terms of increases in tariffs and its greater coverage of products, suggests that the disruption will be even higher.... A similar dispute took place just over 30 years ago, also triggered by a large bilateral trade imbalance, but between the US and Japan.... Japan responded by moving labour-intensive segments of manufacturing production to lower wage destinations in Southeast Asia, giving birth to ‘Factory Asia’ (Baldwin 2006). In the process, Japan was able to retain its export competitiveness... shift a part of its export surplus to the balance of payments accounts of the countries it had invested in, thereby appearing to shrink its bilateral surplus.... The creation of Factory Asia benefitted consumers around the world and raised world incomes. This trade war is having the opposite effect. And the fallout could continue for a long time yet...
#noted #2019-12-20
