US-China Trade War

A study of its Unintended Consequences and Side-Effects

Abstract

The trade disputes between the United States (US) and China during the Trump presidential administration have sparked further debate on the impact of trade wars for the countries directly involved. However, there is a weaker understanding of how these trade disputes also affect other countries as trade redirections are employed to evade trade restrictions. Therefore, this paper seeks to explore the following research question: what have been the effects of Trump’s 2018 tariffs on China and on third-party countries impacted by the shift in trade flows? This paper employs quantitative research methods to investigate the effects of these tariffs by analyzing trade flow data from the US, China, and third-party countries engaged as trade intermediaries for China from 2018 to 2021. This research suggests that China relied significantly on third-party countries for exports to the US, these third-party countries benefited financially from acting as trade intermediaries, and US consumers experienced higher prices as a result of the tariffs and their side effects. Consequently, trade policymakers should be aware of these direct and indirect impacts when deciding to implement tariffs and determining how to structure trade policies to prevent the usage of third-party countries as intermediaries.