Will Increasing Tariffs on China Really Bring the Manufacturing Plants Back to the U.S.?

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Abstract

This paper investigates whether the recent rise in tariffs on goods produced in China will lead processing trade manufacturing plants now located in China to delocate to the U.S. By using a hypothetical extraction method and examining the global value chains of income, we compare the factor payments in the Chinese and U.S. manufacturing sectors. Our estimates indicate that the average tariff rate necessary to move the processing trade firms is 48.15%, i.e. well above the current 25% rate. However, the average tariff rate needed for shifting China's processing plants to Mexico decease to 20.32%.

Original languageEnglish (US)
Pages (from-to)127-149
Number of pages23
JournalGlobal Economic Review
Volume49
Issue number2
DOIs
StatePublished - Apr 2 2020

Keywords

  • Trade war
  • hypothetical extraction method
  • industrial delocation
  • processing trade

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Political Science and International Relations

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