A Comparative Analysis of the Trade Policies of China and the United States of America

This paper presents an economic analysis of the trade dispute between the United States and China. It offers a comprehensive examination of the tariff hikes, delves into the origins of the trade conflict, and evaluates the economic consequences of the dispute. The analysis is based on both empirical data (post-analysis) and simulations (pre-analysis). The average bilateral tariffs between the US and China have risen to 17%. The Phase One Agreement, signed in January 2020, only results in slight reductions in the duties, bringing them down to 16%. In 2019, the trade battle between the US and China resulted in a significant decrease in commerce between the two countries. This conflict also caused a substantial shift in trade patterns, with imports from other regions increasing as a result. Consequently, there has been a restructuring of value chains in (East) Asia. The simulation analysis indicates that the tariff hike has minimal direct impact on the global economy, resulting in a mere 0.1% drop in world GDP. The Phase One Agreement’s effect on the global economy is very minimal, however, the United States is expected to transform actual income losses into actual income gains due to China’s pledge to purchase more American goods. The trade conflict has a significant impact mostly due to the increasing ambiguity surrounding trade policy. The study offers a framework to examine the effects of this uncertainty.