Working Paper: NBER ID: w25860
Authors: Chunding Li; Jing Wang; John Whalley
Abstract: This paper uses a numerical global general equilibrium model to simulate the possible effects of US initiated trade protection measures on US manufacturing employment. The simulation results show that US trade protection measures do not increase but will instead reduce manufacturing employment, and US losses will further increase if trade partners take retaliatory measures. The mechanism is that although the substitution effects between domestic and foreign goods have positive impacts, the substitution effects between manufacturing and service sectors and the retaliatory effects both have negative influences, therefore the whole effect is that the US will lose manufacturing employment.
Keywords: trade protectionism; manufacturing employment; US; simulation; general equilibrium model
JEL Codes: C68; F16; F62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US trade protection measures (F13) | reduction in manufacturing employment (O14) |
| retaliatory measures from trade partners (F10) | exacerbation of losses in manufacturing employment (F66) |
| substitution effects between domestic and foreign goods (F29) | positive impacts (F69) |
| substitution effects between manufacturing and service sectors (O14) | negative impacts (F69) |
| substitution effects between domestic and foreign goods + substitution effects between manufacturing and service sectors + retaliatory measures (F69) | overall reduction in manufacturing employment (L69) |