The Substitution Effect of US-China Trade War on Taiwanese Trade

Chih Hai Yang, Kazunobu Hayakawa

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Using monthly trade data from January 2018 to December 2019, we empirically examine the effects of the US-China trade war on Taiwan's exports as well as imports. On the export side, the tariff hike in the US against imports from China may increase Taiwan's exports to the US, (i.e., the substitution effect). To investigate this hypothesis, we examine how US tariffs on goods from China affect Taiwan's exports to the US. More directly, we also explore how China's exports to the US change Taiwanese exports to the US. On the import side, decline of China's export to the US may boost Taiwan's export while increasing its demand on Chinese intermediate inputs. Our empirical analyses confirmed the validity of these hypotheses. By contrast, we did not find a substitution effect in exports from neighboring countries—that is, Japan and South Korea.

Original languageEnglish
Pages (from-to)324-341
Number of pages18
JournalDeveloping Economies
Volume61
Issue number4
DOIs
StatePublished - Dec 2023

Keywords

  • Taiwan
  • Tariffs
  • Trade war

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