China's Exports in a Protectionist World

         
Author Name Willem THORBECKE (Senior Fellow, RIETI) / CHEN Chen (Xi'an Jiaotong-Liverpool University) / Nimesh SALIKE (Xi'an Jiaotong-Liverpool University)
Creation Date/NO. February 2020 20-E-011
Research Project East Asian Production Networks, Trade, Exchange Rates, and Global Imbalances
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Notes

First draft: February 2020
Revised: June 2021

Abstract

Tariffs, currency wars, and protectionism pose risks for Chinese firms. In theory tariffs and exchange rates exert equivalent effects on export volumes. This paper estimates tariff and exchange rate elasticities for China's exports. The results indicate that, while exchange rates matter, tariffs deter exports almost three times as much as equivalent exchange rate changes do. The results also indicate that China's flagship industries such as electronics and machinery are exposed to tariffs and to exchange rate appreciations. The paper then considers how China can promote freer trade to mitigate risks and reduce uncertainty.