Munich Personal RePEc Archive

The effects of US-China trade war and Trumponomics

Evans, Olaniyi (2019): The effects of US-China trade war and Trumponomics. Published in: Forum Scientiae Oeconomia , Vol. 2, No. 1 (2019): pp. 47-55.

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Abstract

Trumponomics describes the economic policies of U.S. President Donald Trump and has “America-first” approach. The Trump administration risks creating a more fragmented global economy and has started the biggest global trade war. The various sides are still on tenterhooks to impose additional tariffs worth hundreds of billions of dollars. Using deadweight loss (also known as excess burden or allocative inefficiency) and Harberger's triangle, this study shows that: the trade war is devastating not just for the US and China, but for the whole world economy: (i) the prices of items that directly affect consumers’ welfare will rise; (ii) firms will face extra costs for exports; (iii) investors will become more nervous; (iv) some investors will diversify into Bitcoin and other cryptocurrencies; (v) the trade war could turn into a currency war; (vi) even developed countries could be hit by the trade war; and (vii) tariffs applied on developing countries’ exports would rise steeply. In a trade war, everyone may lose.

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