Abstract
AbstractFrom April 2018 to August 2019, the Yuan has declined in value relative to the US dollar by 12.6%, and the effects of this decline have not been studied. This study analyzes the effects of this fall in Yuan value, in isolation of tariffs, on US, Chinese, and world cotton markets. The results show that the adverse effects of the decline in Yuan value reverberate throughout world cotton markets and exacerbate the detrimental effects of the Chinese cotton tariff.
Highlights
With the continued escalation of the US–Chinese trade dispute, the United States has imposed tariffs on $550 billion worth of imports from China, and China has retaliated by placing tariffs on$185 billion worth of imports from the United States (Wong and Koty, 2019)
The objectives of this study are to a) develop a theoretical model to conceptually analyze the effects of the decline in Yuan value in a spatial equilibrium context, b) implement this model empirically to determine the quantitative impacts of the effects of the decline in
The trade dispute between the United States and China has worsened with each country imposing escalating tariffs on a vast number of commodities, which has distorted the world trade order
Summary
With the continued escalation of the US–Chinese trade dispute, the United States has imposed tariffs on $550 billion worth of imports from China, and China has retaliated by placing tariffs on$185 billion worth of imports from the United States (Wong and Koty, 2019). That it may devalue the Yuan against a particular currency, such as the US dollar, while leaving its value unchanged against other currencies (Devadoss et al, 2014) This causes Chinese exports to the United States to become cheaper, resulting in more exports to the United States, and counteracting the adverse effects of US tariffs. A lower valued Yuan has the opposing effect of US ad valorem tariffs on US imports from China, and a 10% decline in Yuan value would fully counter the impacts of a 10% US tariff on Chinese goods.
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