Mercantilism's Groundhog day: The US-China trade war and US energy exports to Northeast Asia

Abstract

We use detailed quarterly data on US energy exports to examine the impacts of the US-China trade dispute on US energy-related commodity exports. Largely due to the shale revolution, the energy-related US current account balance has been reduced to close to zero, down from accounting for about half of the trade deficit in 2008. This is despite evidence that tariffs on imported energy-related commodities, such as solar panels, did not appear to negatively impact US imports. We estimate a regression of non-energy net exports dependent on gross domestic product, the exchange rate, and past non-energy trade deficit. We argue that the trade war led to a number of distortions that reshaped the US balance of trade in energy-related commodities. The risks of a protracted US-China trade war include slower economic growth, which is compounded by the risks associated with the aftermath of COVID-19.