ZHANG Yu, GAO Xiang, XU Ran, YANG Cuihong
This paper adopts the DID approach to investigate the trade destruction effects and trade deflection effects of the US additional tariffs. The authors find that the US additional tariffs significantly reduce China’s exports of tariffed products to the US (i.e., trade destruction effect), especially intermediate and labor-intensive products. On the other hand, they significantly increase China’s exports of tariffed products to the third market (i.e., trade deflection effect). For the $50 billion list, both the trade destruction effect and trade deflection effect are concentrated on processing exports, and the US additional tariffs significantly increase China’s exports of tariffed products to ASEAN, Japan and Australia. For the $200 billion list, the US additional tariffs boost China’s exports of chemicals, textiles, wood, metal products, furniture and other products to the EU, Australia, Japan, South Africa and Hong Kong, China. Furthermore, most trade deflections are not realized by lowering export prices, indicating that the trade deflections could compensate for the profit losses caused by the US additional tariffs to a certain extent. The proposed results suggest that searching for substitutions of export markets and a more open trade policy is an important way to avoid profit losses and reduce risks for enterprises and economies suffering from trade frictions.
