The US-China trade war with increasing trade policy uncertainty
Journal of Chinese Economic and Foreign Trade Studies
ISSN: 1754-4408
Article publication date: 23 October 2020
Issue publication date: 8 December 2020
Abstract
Purpose
This study aims to examine the impacts of changing US trade policy uncertainty (henceforth, TPU Index) on US bilateral trade balance with China from a nonlinear methodology perspective.
Design/methodology/approach
The nonlinear auto regressive distributed lag (ARDL) model, recently developed by Shin et al. (2014), is applied. This model decomposes the TPU Index series into its increases (TPU+) and decreases (TPU−) and creates two new TPU Index series.
Findings
Empirical findings indicate that increases in the TPU Index improve the US bilateral trade balance only in the short-run (no long-run impact). However, decreases in the TPU Index worsen the US trade balance in the short run but improve it in the long run. Apart from these effects detected on US–China bilateral trade balances, this empirical study draws the conclusion that changing trade policy uncertainty plays a significant determining role for bilateral trade volumes.
Originality/value
Decomposed TPU index with the nonlinear ARDL model enables us to examine the separate impacts of the changes in TPU+ and TPU− indexes on US bilateral trade balance with China. Therefore, this model may discover potentially concealed-hidden true impacts of TPU index on US bilateral trade balance with this country.
Keywords
Acknowledgements
Declaration of competing interest: The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Citation
Ongan, S. and Gocer, I. (2020), "The US-China trade war with increasing trade policy uncertainty", Journal of Chinese Economic and Foreign Trade Studies, Vol. 13 No. 2, pp. 87-94. https://doi.org/10.1108/JCEFTS-01-2020-0002
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited