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1. Economic Sanction Games among the US, the EU and Russia: Payoffs and Potential Effects

Author:
Dong Yan and Li Chunding
Publication Date:
07-2018
Content Type:
Working Paper
Abstract:
Economic sanction of the US and EU on Russia because of Ukraine crisis in 2014 lasts for a long time and is still a hot policy topic. This paper uses a 16-country or region numerical general equilibrium model with trade cost and exogenous trade imbalance to explore this three-country economic sanction game payoffs, and simulate the effects of sanctions on individual countries. Our analysis find that all sanction involved countries will be hurt, but comparatively Russia will be hurt more, and the US and EU will be hurt less. Sanction measures of EU have larger impacts to Russia than the US measures, and meanwhile Russian counter-sanction measures will generate larger impacts on the EU than on the US. From the economic perspective, the optimal choice for US and EU is to give up sanction measures to Russia, and retaliation is Russia’s optimal choice when faced with sanction measures. Countries out of the sanction game will gain because of trade diversion effects.
Topic:
Economics, Sanctions, European Union, and Economy
Political Geography:
Russia, Europe, and United States of America

2. Who Can Win the Possible China-US Trade War?

Author:
Li Chunding
Publication Date:
06-2018
Content Type:
Working Paper
Abstract:
This paper uses a multi-country global general equilibrium (GE) model to numerically simulate the effects of possible China-US trade wars. We introduce an endogenous trade imbalance structure with trade cost into the model which helps to explore both tariff and non-tariff trade war effects. Our simulation results show that China will be significantly hurt by the China-US trade war, but negative impacts are affordable. The US can gain under unilateral sanction measures to China, but will lose if China takes retaliation measures. Comparing the effects under mutual trade war, China will lose more than the US. Introducing non-tariff barrier trade wars will intensify the negative effects, and comparatively negative effects to China are larger than to the US. Mexico’s involvement in trade war with the US will strengthen the negative effects and comparatively hurt the US more. Under non-cooperative and cooperative Nash bargaining equilibrium, the US can gain more than China in trade war negotiation, which means the US has stronger bargaining power than China. Additionally, trade wars between China and the US will hurt most countries and the world especially in GDP and manufacturing employment, but benefit their welfare and trade.
Topic:
Economics, International Trade and Finance, Tariffs, and Trade Wars
Political Geography:
China, Asia, North America, and United States of America