2019 | 7 | nr 1 Toward an Inclusive, Entrepreneurial and Economically Sustainable Future for Developing and Central Eastern European Countries | 47--55
The Effects of the US-China Trade War and Trumponomics
Trumponomics describes the economic policies of U.S. President Donald Trump and has an "America-first" approach. The Trump administration risks creating a more fragmented global economy, and has started the biggest global trade war to date. The various sides are still on tenterhooks and threatening 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 entire global 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. (original abstract)
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