Journal
APPLIED ECONOMIC PERSPECTIVES AND POLICY
Volume 43, Issue 2, Pages 619-640Publisher
WILEY
DOI: 10.1002/aepp.13138
Keywords
gravity model; retaliation; trade aid programs; trade war
Categories
Funding
- Priority Academic Program Development of Jiangsu Higher Education Institutions (PAPD)
- National Science Foundation of China [71934005, 71903090]
- Office of the Chief Economist [58-0111-19-013]
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The retaliatory measures imposed by foreign countries in response to United States' Section 232 and 301 tariffs led to significant agricultural export losses for the U.S., with seasonal impact, varying effects depending on product type, and alignment with USDA's trade damage estimates. However, there was little evidence of U.S. exports being able to reorient to nonretaliating markets.
We estimate the ex-post agricultural trade impacts of retaliatory measures imposed by foreign countries in response to United States' Section 232 and 301 tariffs using a theoretically consistent, monthly, product line gravity equation. Retaliation led to significant US agricultural export losses of $13.5 to $18.7 billion on an annualized basis. Considerable heterogeneity exists in the average treatment effect of retaliation. First, retaliatory trade actions presented a strong within-year seasonal impact. Nearly 70% of aggregate trade losses occurred during the US's peak export marketing season. Second, U.S. trade losses were particularly pronounced on homogeneous bulk commodities, whereas product differentiation dampened the impact of retaliation. Third, with few exceptions, the counterfactually estimated direct trade losses line up well with the U.S. Department of Agriculture's (USDA) trade damage estimates for trade aid programs distributed to farmers impacted by the trade dispute. Finally, we find little evidence that U.S. exports were able to be reoriented to alternative, nonretaliating markets-an indication of high bilateral trade frictions and the destructive consequences of retaliatory trade actions.
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