Some Insight of Trade War

Professor Somesh Kumar Mathur

IIT Kanpur
Date Country imposed Imposed on Tariff Rate Applied On Volume of Product Exception and Others

February 7, 2018 US Whole world 30% Solar pannels US$8.5 billion except canada

February 7, 2018 US Whole world 20% Washing Machine US$1.8 billion  

March 23, 2018 US Whole world 25% Steel   except Argentina, Australia, South Korea and Brazil

March 23, 2018 US Whole world 10% Aluminium   except Argenitna, Australia
fruit, wine, seamless steel pipes, pork and recycled
April 2, 2018 China US 15-25% 128 products US$3 billion aluminium
June 5,2019 US India varied GSP:2014+ US$5.7 billion  
June 21, 2018
Turkey US 10-140% 22 items US$1.8 billion whole catagories therefore effectively lot more goods
June 22, 2018 EU US 25% List1: 182 US$3.2 billion  
July 6, 2018 US China 25% List 1: 818 items US$34 billion  
July 6, 2018 China US 25% List 1 : 545 itens US$34 billion  

August 5, 2018 fiber optics and equipment for road construction, the
Russia US 25-40% 79 items   oil and gas industries and metal processing and mining
semiconductors, chemicals, plastics, motorbikes and
August 23, 2018 US China 25% List 2: 279 items US$16 billion electric scooters

August 23, 2018 China US 25% List 2 : 333 itens US$16 billion coal, copper scrap, fuel, buses and medical equipment
September 24, 2018 US China 10% List 3 US$200 billion  
September 24, 2018 China US 5 or 10% List 3: 5207 US$60 billion  
May 10, 2019 US China 25% List 3 US$200 billion  
May 17,2019 US Turkey varied GSP:2014+ US$1.7 billion  
5,10,20 or
June 1, 2019 China US 25% List 3:5140 US$60 billion  

June 16, 2019 India US 10,20,15% 28 goods US$1.4 billion  

Effective Tariff Rates
China India on Turkey Russsia US on
GTAP Product Description on US US on US on US EU on US China
PDR - Paddy rice 25   50     25
GRO - Cereal grains n.e.c. 24.6       10.25 25
39.39
V_F - Vegetables, fruit, nuts 3       0.05 24.99
OSD - Oil seeds 34.89 20.48 18.79     25
PFB - Plant-based fibers 25          
OCR - Crops n.e.c. 20.24         21.86
CTL - Bovine cattle, sheep and goats,
horses 7.04          

OAP - Animal products n.e.c. 19.11   40.16     19.54

WOL - Wool, silk-worm cocoons 32.41          

FRS – Forestry 34.49         20.25
FSH – Fishing 17.65         6.98
COA – Coal 25         25
GAS – Gas 35          
 India on Turkey on Russsia on US on
GTAP Product Description China on US US US US EU on US China
OMN - Minerals n.e.c. 30.27   13.69     6.59
CMT - Bovine meat prods 41.4615         24.69
OMT - Meat products n.e.c. 37.05         24.98
VOL - Vegetable oils and fats 23.72         13.33
MIL - Dairy products 23.3          
PCR - Processed rice 25       25 25
SGR – Sugar 17.66         20.04
OFD - Food products n.e.c. 28.28       0.69 23.8
B_T - Beverages and tobacco
products 37.09   50   3.85 16.78
TEX – Textiles 24.37       1.39  
WAP - Wearing apparel 34.55   6.9   1.12  
LEA - Leather products 25.62   11.87   3.03 0.14
LUM - Wood products 33.39          

PPP - Paper products, publishing 17.11         0.003

P_C - Petroleum, coal products 25         45.77

CRP - Chemical, rubber, plastic
products 17.63   6.43   0.13 25.132
 China on India Turkey Russsia EU on US on
GTAP Product Description US on US on US on US US China
NMM - Mineral products
n.e.c. 21.74   7.48     0.83
I_S - Ferrous metals 29.14   1.59   5.13 0.16
NFM - Metals n.e.c. 31.61 0.61 2.06   2.44  
FMP - Metal products 29.33       5.92 3.77
MVH - Motor vehicules
and parts 37.73 1.33       3.92
OTN - Transport
equipment n.e.c. 24.67       1.02 14.74
ELE - Electronic equipment 33.49 4.66 1.05 0.96   10.09
OME - Machinery and
equipment n.e.c. 24.96   22.03   0.05 17.73
OMF - Manufactures n.e.c. 27.94       0.02 0.01
GDT - Gas manufacture,
distribution 25   0.05 3.61    
Total Sectors Effected 39 4 14 2 14 29
 SHOCKS
• We have given following shocks in the GTAP:
• US additional 25% import duty on all steel imports apart from Australia, Argentina,
Brazil, Canada, Mexico and South Korea
• Additional 10% US import tariff on aluminium apart from Australia, Argentina, Canada
and Mexico
• Additional tariffs of waves of 25% (10 in some cases) charge on Chinese products
listed by the US
• Additional tariffs of waves of 25% (5, 10 and 20 in some cases) charge on products
originating from the US listed by China
• Retaliation from European Union
• Retaliation from India
• Retaliation from Turkey
• Retaliation from Russia
REGIONAL AGREGATIONS
We have aggregated countries into following regions:
• India
• US
• China
• Mexico
• Canada
• Pakistan
• Australia
• EU
• Russia
• South Korea
• Japan
• Malaysia
• Bangladesh
• Singapore
• Vietnam
• UAE
• Argentina
• Brazil
• Turkey
• Rest of the world
• 
 GDP prospects
qgdp qgdp(Ch/%Ch) vgdp pgdp(Ch/%Ch)
chn -462 -0.0084 0.00005
jpn 18.5 0.0326 0.00032
kor 22.375 0.03853 0.00036
mys 0.67188 0.01953 0.00019
sgp 0.70313 0.02393 0.00024
vnm -0.63281 0.01353 0.00014
bgd -0.01563 0.01166 0.00012
ind -2.25 0.02088 0.00021
pak 0.15625 0.01653 0.00016
can 14.875 0.02479 0.00024

usa -129 -0.04585 -0.00045

mex -3.8125 0.02116 0.00022
bra 7.5 0.02676 0.00026
EU_25 22 0.01865 0.00019
arg 2.82813 0.03361 0.00033
are 0.0625 0.01257 0.00013
tur -3.6875 0.02056 0.00021
rus -3.125 0.0143 0.00015
aus 2 0.02251 0.00022

RestofWorld 25.5 0.01868 0.00018

 Regions
Welfare
alloc tot IS Total
1 chn -462 -97.3 65.2 -494
2 jpn 18.4 155 12.6 186
3 kor 22.4 73.1 5.24 101
4 mys 0.676 7.49 1.8 9.97
5 sgp 0.706 15.5 3.62 19.9
6 vnm -0.633 -0.534 0.931 -0.236
7 bgd -0.014 -0.585 0.388 -0.211
8 ind -2.27 13.8 16.7 28.2
9 pak 0.152 0.757 0.551 1.46
10 can 14.9 103 10.9 128
11 usa -129 -694 -304 -1127
12 mex -3.79 53.9 6.89 57
13 bra 7.51 29.4 3.52 40.4
14 EU_25 22.9 200 95 318
15 arg 2.83 14 0.88 17.7
16 are 0.056 -0.198 0.662 0.52
17 tur -3.67 5.94 4.44 6.72
18 rus -3.08 -6.76 14.3 4.44
19 aus 2.03 18.1 8.21 28.3
20 RestofWorld 25.6 110 52.3 188
Total -486 0 0.001 -486
Trade Balance Terms of trade pfactor
Regions Trade Balance Regions TOT(Ch/%Ch) pfactor(Ch/
Chn 123.84231 chn -0.00008 Regions %Ch)
jpn -210.02933 jpn 0.0002 chn -0.00023
kor -38.01601 jpn 0.00033
kor 0.00017
mys 2.9891 kor 0.00039
mys 0.00003
sgp 3.2766 mys 0.00019
vnm -2.29285 sgp 0.00007
sgp 0.00024
bgd -1.91559 vnm 0
vnm 0.00014
ind -19.46001 bgd -0.00003
bgd 0.00011
pak -5.62583 ind 0.00006
ind 0.0002
can -73.59445 pak 0.00003 pak 0.00017
usa 996.66705 can 0.00025 can 0.00025
mex -42.02018 usa -0.00048 usa -0.00049
bra -47.44583 mex 0.00022
EU_25 -482.0043 mex 0.00022
bra 0.00017 bra 0.00027
arg -2.29503
EU_25 0.00003 EU_25 0.00019
are -9.82303
tur -22.08481 arg 0.00022 arg 0.00034
rus 0.41316 are 0 are 0.00012
aus -28.2014 tur 0.00005 tur 0.0002
rus -0.00003 rus 0.00014
RestofWorld -142.37997 aus 0.00011 aus 0.00023
Restof RestofWorl
World 0.00004 d 0.00019
 : Real returns to factor of productions

Regions Land UnSkLab SkLab Capital NatRes

chn 0.05228 -0.02876 -0.03393 -0.03271 0.0026
jpn -0.03537 0.00452 0.00478 0.00418 0.00253
kor -0.01782 0.01109 0.01074 0.01027 0.00132
mys 0.0141 0.00312 0.00207 0.00411 -0.02255
sgp 0.00542 0.00627 0.00503 0.00726 -0.00814
vnm 0.02715 -0.00117 -0.0032 -0.00332 -0.00881
bgd 0.00855 -0.00339 -0.00409 -0.00031 0.01473
ind 0.05719 -0.00642 -0.00877 -0.00804 -0.01583
pak 0.01006 0.00099 -0.00022 -0.00059 -0.00395
can -0.02291 0.01041 0.01053 0.00904 -0.03564
usa -0.19559 -0.01312 -0.00947 -0.01189 0.12726
mex -0.08142 0.00822 0.00839 0.00647 -0.02663
bra 0.11236 0.00165 0.00106 0.00216 -0.05736
EU_25 0.00547 0.00226 0.00154 0.00157 -0.02334
arg 0.14606 0.00385 0.00172 0.00261 -0.06676
are 0.01432 0.00074 -0.00042 0.00046 -0.005
tur 0.05876 0.00138 -0.00076 -0.00154 -0.01213
rus 0.01391 0.00053 -0.00054 -0.00077 -0.01678
aus 0.08707 0.00337 0.00197 0.00256 -0.02981
RestofWorld 0.00843 0.00363 0.00231 0.00251 -0.02654
Free Trade Scenario in GTAP Model. US Imposing
zero tariffs on India and China with reciprocity
Countries EV (change in welfare USAD million)

1 EU_25 -1956.15

2 ind -460.63

3 chn 13930.44

4 USA 4078.02

5 jpn -1146.57

6 sgp -100.94

7 mys -153.43

8 kor -668.93

9 can -1020.32

10 mex -593.83

11 bra -179.12

12 RestofWorld -3105.4
Welfare Decomposition under Free Trade
WELFARE Allocative efficiency Terms of trade  Investment savings Total

1 EU_25 -435 -1466 -55.5 -1956

2 ind 0.377 -276 -159 -434

3 chn 9139 5851 -1060 13930

4 USA 1069 2211 799 4078

5 jpn -64.1 -1153 70.9 -1147

6 sgp -4.18 -108 10.8 -101

7 mys -9.53 -163 19.4 -153

8 kor -136 -566 33.4 -669

9 can -152 -878 9.38 -1020

10 mex -34.6 -601 41.4 -594

11 bra -67.9 -126 14.7 -179

12 RestofWorld -637 -2746 278 -3105

Total 8667 -20 2.2 8649

Change in Trade Balance Under Free Trade
Scenario Analyzed in GTAP
Regions DTBAL(million USAD)

1 EU_25 1581.3

2 ind -831.41

3 chn 3290.82

4 USA -7444.26

5 jpn 972.69

6 sgp -34.53

7 mys -23.96

8 kor 188.58

9 can 541.9

10 mex 371.42

11 bra 146.15

12 RestofWorld 1241.32
GDP Impact of Free Trade

Regions vgdp(% change) qgdp(% change) pgdp(% change)

1 EU_25 -0.11 0 -0.1

2 ind -0.25 0 -0.24

3 chn 0.82 0.26 0.56

4 USA 0.11 0.01 0.1

5 jpn -0.18 0 -0.18

6 sgp -0.15 0 -0.14

7 mys -0.2 -0.01 -0.2

8 kor -0.22 -0.01 -0.21

9 can -0.32 -0.01 -0.31

10 mex -0.32 0 -0.32

11 bra -0.14 0 -0.13

12 RestofWorld -0.17 -0.01 -0.16

 SMART SIMULATIONS. FREE TRADE
SCENARIO FOR ALL GOODS
Partial Equilibrium Model, Free-trade scenario (WITS)
We have Used SMART analysis for our partial equilibrium model. The table-8 below shows the welfare and revenue impact of the zero tariffs for goods emanating out of USA, China and India.  

Partner to Reporter Welfare of the Reporter (in Billion USAD) Revenue Impact of the Reporter (in Billion USAD)

China to USA 0.883 -12.649

India to USA 0.144 -1.487

USA to China 1.262 -7.483

USA to India 0.783 -1.936

TC, TD Under Free Trade Scenario-SMART
SIMULATIONS
Country           China To USA       India to USA       USA to China         USA to India               Total
TC(Billion TD(Billion TC(Billion TD(Billion TC(Billion TD(Billion TC(Billion TD(Billion TC(Billion TD(Billion
  USAD) USAD) USAD) USAD) USAD) USAD) USAD) USAD) USAD) USAD)
India 0 -0.505 1.992 1.5 0 -0.685 0 0 1.992 0.31
China 17.46 7.991 0 -0.512 0 0 0 -0.271 17.46 7.208
USA 0 0 0 0 13.662 6.227 3.91 1.14 17.572 7.367
Japan 0 -0.2785 0 -0.0295 0 -0.447 0 -0.017 0 -0.772
Data Not
Singapore 0 -0.0225 0 -0.0055 0 0 -0.037 0 -0.065
Available
Malaysia 0 -0.0805 0 -0.0065 0 -0.0875 0 -0.019 0 -0.1935
Korea 0 -0.2105 0 -0.016 0 -0.5015 0 -0.069 0 -0.797
Canada 0 -0.454 0 -0.046 0 -0.198 0 -0.041 0 -0.739
Data Not
Mexico 0 -1.084 0 -0.0715 0 0 -0.007 0 -1.1625
Available
Brazil 0 -0.0545 0 -0.0195 0 -0.387 0 -0.0085 0 -0.4695
EU 0 -1.203 0 -0.2 0 -2.785 0 -0.423 0 -4.611
Rest of
0 -4.0985 0 -0.5935 0 -1.136 0 -0.2475 0 -6.0755
World
 Partial equilibrium model, SMART simulation for free trade (Specialized products):

SMART SI,ULATIONS OF FREE TRADE

FOR SPECIALIZED PRODUCTS
Welfare (in Bill. USAD) Revenue Impact (in Bill. USAD)

China to USA 0.807 -10.673

India to USA 0.132 -1.275

USA to China 0.476 -3.11

USA to India 0.162 -1.284

TC, TD for SPECIALIZED PRODUCTS UNDER SMART

Country         China to USA         India to USA         USA to China         USA to India

TC(Bill. USAD) TD(Bill. USAD) TC(Bill. USAD) TD(Bill. USAD) TC(Bill. USAD) TD(Bill. USAD) TC(Bill. USAD) TD(Bill. USAD)
India 0 -0.422 1.656 1.236 0 -0.052 0 0
China 1.441 6.416 0 -0.427 0 0 0 -0.176
USA 0 0 0 0 7.711 2.708 1.937 1.091
Japan 0 -0.174 0 -0.011 0 -0.457 0 -0.045
Singapore 0 -0.01 0 -0.005 0             NA 0 -0.027
Malaysia 0 -0.056 0 -0.006 0 -0.039 0 -0.011
S. Korea 0 -0.138 0 -0.008 0 -0.299 0 -0.039
Canada 0 -0.22 0 -0.021 0 -0.074 0 -0.018
Mexico 0 -0.862 0 -0.037 0             NA 0 -0.004
Brazil 0 -0.034 0 -0.017 0 -0.368 0 -0.006
EU 0 -0.815 0 -0.156 0 -0.727 0 -0.278
Rest of World 0 -3.685 0 -0.548 0 -0.692 0 -0.487
Free Trade of Targeted Products SMART SIMULATIONS
WELFARE IMPACT

Welfare (in Bill. USAD) Revenue Impact (in Bill. USAD)

China to USA 0.050 -1.838

India to USA 0.001 -0.044

USA to China 0.737 -3.825

USA to India 0.502 -0.249

TC,TD FOR TARGETED PRODUCTS:
SMART SIMULATIONS

Country         China to USA         India to USA         USA to China         USA to India

TC(Bill. USAD) TD(Bill. USAD) TC(Bill. USAD) TD(Bill. USAD) TC(Bill. USAD) TD(Bill. USAD) TC(Bill. USAD) TD(Bill. USAD)
India 0 -0.033 0.076 0.059 0 -0.013 0 0
China 2.565 1.368 0 -0.02 0 0 0 -0.029
USA 0 0 0 0 7.209 3.001 0.956 0.166
Japan 0 -0.112 0 -0.004 0 -0.427 0 -0.006
Singapore 0 -0.007 0                   -0.00004 0           NA 0 -0.001
Malaysia 0 -0.029 0 -0.0002 0 -0.01 0 -0.001
S. Korea 0 -0.058 0 -0.002 0 -0.099 0 -0.006
Canada 0 -0.109 0 -0.007 0 -0.127 0 -0.018
Mexico 0 -0.452 0 -0.008 0           NA 0 -0.001
Brazil 0 -0.008 0 -0.0003 0 -0.335 0 -0.001
EU 0 -0.255 0 -0.005 0 -1.818 0 -0.048
Rest of World 0 -0.304 0 -0.011 0 -0.173 0 -0.055
simulation included a free trade scenario wherein zero tariffs were considered for
all GTAP products emanating out of USA, China, India, Canada, Mexico and EU.

Regions EV(million USAD)

1 EU_25 -1789.49

2 ind -712.93

3 chn 12514.83

4 USA 12501.54

5 jpn -1796.49

6 sgp -182.17

7 mys -233.47

8 kor -975.65

9 can -1930.95

10 mex -1160.61

11 bra -473.36

12 RestofWorld -5754.46
Free Trade of US with
China,India,Mexico,EU and Canada
WELFARE 1 alloc_A1 5 tot_E1 6 IS_F1 Total
1 EU_25 714 -1820 -683 -1789
2 ind -36.9 -379 -272 -688
3 chn 8726 5251 -1463 12515
4 USA 1528 8106 2872 12506
5 jpn -96 -1636 -64.2 -1796
6 sgp -7.24 -153 -21.7 -182
7 mys -13.1 -225 4.26 -233
8 kor -201 -740 -35 -976
9 can 533 -2409 -54.4 -1931
10 mex 3.5 -1165 1.27 -1161
11 bra -134 -334 -5.23 -473
12 RestofWorld -929 -4542 -284 -5754

Total 10087 -45.7 -4.52 10036

Change in Trade Balance under Free Trade of US with China,
India, Canada, Mexico and EU: GTAP SIMULATIONS
Regions  DTBAL(million USAD)

1 EU_25 2779.17

2 ind -506.78

3 chn 3513.57

4 USA -14773.7

5 jpn 2576.64

6 sgp -28.18

7 mys -33.1

8 kor 470.64

9 can 970.23

10 mex 732.24

11 bra 650.53

12 RestofWorld 3648.75
Free Trade of US with China, India, Canada,
Mexico and EU: GTAP SIMULATIONS
Regions pgdp(% change) qgdp(% change) vgdp(% change)
1 EU_25 -0.2 0 -0.2
2 ind -0.37 0 -0.38
3 chn 0.4 0.25 0.65
4 USA 0.41 0.01 0.42
5 jpn -0.33 0 -0.34
6 sgp -0.26 0 -0.26
7 mys -0.34 -0.01 -0.34
8 kor -0.34 -0.02 -0.36
9 can -0.84 0.04 -0.8
10 mex -0.57 0 -0.57
11 bra -0.34 -0.01 -0.35
12 RestofWorld -0.31 -0.01 -0.32
Summary
• US looses in terms of welfare and GDP with trade war. Improves its trade
balance
• China looses in terms of trade balance,GDP and Welfare with trade war
• Selective Free Trade of US with India and China and with reciprocity brings
higher welfare for both China and US as compared to tariff war scenario.
India has gained in protectionist environment than when having free trade
with US and China. Other countries looses in free trade scenario like EU,
Brazil, Japan,Vietnam,among others than when US indulges in trade war
with India and China
• Multilateral Liberalization is a win win scenario under the aegis of the WTO.