Can Trade Closedness Inflict Production Desgrowth? The Case of the U.S.-China Trade War

Abstract

In this paper, we show an alternative method to evaluate the impact of trade and non-trade barriers on the final Output of a country. More specifically, we develop a new method, namely the Trade Dispute Sensibility Analysis (TDS-Analysis). The main idea behind the construction of TDS-Analysis is to propose a series of new indicators to evaluate trade disputes, including the trade closedness index (Ĉ-Index) and the production desgrowth Function (Ð-Function). Performing the TDS-Analysis first requires measuring the Ĉ-Index. Second, we need to calculate the Ð-Function based on measuring four sub-Ð-Functions - for example, agriculture sector, industrial sector, manufacturing sector, and service sector. The measurement of the four sub-Ð-Functions can facilitate final specialization, production restructuring, and appropriate policies for each country in a trade conflict. Finally, we apply the TDS-Analysis to the US-China trade dispute.