The Impact of U.S. Carbon Tariff on Chinas Exports and Welfare Based on Empirical Analysis and Game Models

Abstract

This paper will begin by formulating an optimal tariff model between China and the U.S., leading us to an equilibrium point. From this vantage point, we will deduce the consequences of U.S. tariffs on China's exports and the ramifications of U.S. carbon tariffs on China's societal welfare. Next, we will develop an economic model considering the existing China-U.S. tariffs and their trading relationship. This model will help determine the influence of U.S. tariffs on China's export volume and societal welfare. In addition, we will compute the impact of U.S. tariffs on China's societal welfare and export to the U.S., factoring in China's carbon emissions per 100 yuan of GDP, and finally, concern the industrial impact of such carbon tariffs. Third, using two distinct game models, we would probe into the viability and possibility of the U.S. levying a carbon tariff on Chinese exports. The evolutionary game models reflect real-world scenarios, which point out that the U.S. will eventually apply a carbon tariff on China. Next, the dynamic game model considers different parties, Chinas government and firms, and different factors, environmental costs, and green subsidies. The model provides the circumstances in which the U.S. will levy a carbon tariff, whether China should provide a green subsidy, and whether the company should implement green production technology. Finally, we would discuss potential strategies China might adopt to navigate the challenges of the U.S. carbon tariff and examine the broader implications of such a move.