The Consequences of the US-China Trade War on Global Economic Growth

Abstract

 Trade has a huge influence on the economic growth of a country, due to globalization no country could fulfil their national needs and desire without international trade. This study aims to measure and analyse the consequences of the United States and China trade war on the United States and China›s economic growth and global economic growth. To achieve this objective, the study employed Autoregressive Distributed Lag (ARDL) model depending on monthly data from 2016 M1 to 2019 M12. The data were obtained from Federal Reserve Economic Database (FRED) and The United States Census Bureau (USCB), Economic indicators. The result of the study shows that: Dummy variable (D) indicates the tariff rate has a positive and statistically significant effect on United States GDP. However, the effect of tariff rate (D) on the Chines GDP is negative and statistically significant. Likewise,  tariff rate(D) harms global GDP, thus if tariff rate (D) changes by 1%, the global GDP decreases by (0.005).  In conclusion, increasing tariff rates from both countries (the U.S. and China) has negative consequences on their economic growth and the global GDP.