US economic and trade sanctions against China: A loss-loss confrontation

Abstract

The economic and trade sanctions implemented by the United States (US) against China have lasted for a few decades and the structural imbalance of the US–China trade relationship has ultimately been escalated to a trade war recently. We examine the economic impacts of US sanctions against China on both sponsor and target countries during the last 20 years. We find that such impacts have significantly changed over time. On one hand, US economic sanctions have gradually extended from China’s labour-intensive to high value-added products and they have largely slowed down China’s trade growth for the last decade. On the other hand, US consumers and businesses have faced higher prices and production costs for Chinese imports (or import substitutes) in the wake of the increasing US trade sanctions, leading to great deadweight losses to the sponsor country. In addition, US economic and trade sanctions against China have largely impacted other economies involved in US–China trade as well. The intermediary status of the Hong Kong SAR has been greatly challenged. Overall, US economic and trade sanctions have caused pain on both China and the US, but their impact on China (the target country) has been largely weakened.