The short-term impact of US-China trade war on global GHG emissions from the perspective of supply chain reallocation

Abstract

Changes in trading relationships including trade wars can have a large impact on the distribution of GHG emissions across supply chains, and thus resulting in the changes of global emissions. One such example is the US-China trade conflict after 2017. Although previous studies have examined the emission impacts resulting from tariff adjustments during China-US trade wars, they did not investigate what would happen when goods in supply chains are reallocated to other countries. This is important due to complex global trading interconnections and different emission intensities for goods in different regions. We examine the multi-regional and multi-sectoral changes in GHGs from a shift in China-US trading relationships between 2010 and 2017. We develop four scenarios to explore how emissions change under an extreme scenario if China-US trade was reallocated to other regions. We find that an absence of China-US trade would decrease emissions from those products and services by 1.2% but when these products and services are reallocated to the rest of the world, global emissions increase on net by 0.3–1.8%. This increase is mainly driven by increased domestic production within China, contributing a 5–8.7% increase in China's emissions due to higher emission intensities. The reallocation of the excluded products in the US-China relationship would lead to large shifts of embodied emission to other regions, especially for other Asian countries which see an increase of 1.2–5.7% compared to 2017 levels.