Michael Funke (Hamburg University) - Semiconductors and the US-China Trade Conflict

Co-author: Adrian Wende (Hamburg University) entitled

The recent trade disputes and the technological rivalry between the US and China make the effects of trade policy one of the most relevant economic subject areas. We employ a multi-country, multi-sector general equilibrium modelling framework with imperfect competition and heterogeneous firm productivities as a tool for a quantitative analysis of protectionist semiconductor measures. The key methodological contribution of the paper is to isolate the role of semiconductors in the international transmission of trade shocks. The model calibrations reveal that Chinese GDP falls throughout. The US also loses, but to a much lesser extent and especially if the export ban is implemented unilaterally. On the contrary, the trade diversion effect eventually leads to a positive effect upon the rest of the world.

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