US-China rivalry: The macro policy choices

Rod Tyers, Yixiao Zhou

    Research output: Contribution to journalArticle

    Abstract

    Stylised representations of recent US and Chinese tax reforms, tariffs against imports and alternative Chinese monetary targeting are examined using a calibrated global macro model that embodies both trade and financial interdependencies. For both countries, unilateral capital tax relief and bilateral tariffs are shown to be ebeggar thy neighborf policies. As large economies, both enjoy eoptimal tariffsf, even bilaterally, though net outcomes are shown to depend on the allocation of revenues. Bilateral tariffs are most advantageous for the US if the additional revenue finances indirect tax relief. Once US bilateral tariffs are imposed, China is a net loser irrespective of its policy response, though a currency float is shown to cushion the effects on its GDP in the short run. Equilibria in normal form non]cooperative tariff games have the US imposing tariffs while China liberalises.
    Original languageEnglish
    Pages (from-to)2286-2314
    JournalThe World Economy
    Volume43
    Issue number9
    DOIs
    Publication statusPublished - 2020

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