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Reshaping Sino-US Value Chains under Trump's Tax Reform Based on the GTAP-GVC Model

【Authors】
ZHOU Lingling & ZHANG Keyu
【WorkUnit】
ZHOU Lingling (University of International Business and Economics, 100029)ZHANG Keyu (Beijing Wuzi University, 101149)
【Abstract】

With deepening labor division along global value chains, the changes in a country's economic policy will greatly affect the global economic structure. Therefore, it is of utmost importance to discuss the effect of Trump's tax reform on reshaping Sino-US global value chains. Considering the Global Trade Analysis Model (GTAP) cannot describe clearly the policy effects on global value chains, we make the linkage between GTAP model and the popular value-added trade decomposition model (KWW, 2014) for the first time and measure changes of trade value added of China and the USA. There are some interesting findings: (1) Relative to baseline scenario, although Trump's tax reform will slightly restrain Chinese GDP growth rate (0.49%), real export will increase (1.16%). (2) From GVC decomposition at the country level, Chinese domestic value added embodied in export to USA will grow up by 27.6 billion dollars. (3) To analyze the effect on the industry level, we take textile, motor and parts, and electronics as examples. We find the US tax cut will promote trade value added on electronics mostly, and domestic trade value added on textile grows weakly, and domestic trade value added on motor and parts increases most slightly. (4) From different trade partners, we find in China domestic value added in textile industry will increase for all partners; however, the motor industry and electronics are totally different, whose domestic value added embodied in US trade will increase while export to others will decrease.

JEL:F14, F15, F62

【KeyWords】
Trump's Tax Reform, Global Value Chains, GTAP-GVC Model