Trade Wars and the Disarray in the Global Trading System: Implications for the Philippines

Abstract

This study uses the Caliendo and Parro ( 2015 ) multi-sector, multi-country, general equilibrium Ricardian trade model with national and international input-output linkages to assess the impact on welfare of higher tariffs due to the U.S.–China trade war in the case of the Philippines. A sample of 65 countries including a constructed rest of the world is used, with 31 ICIO tradeable and non-tradeable sectors and 2015 as the base year. The constructed scenario is of the U.S.–China tariff tit-for-tat and retaliatory measures taken by Mexico, Canada, EU, Russia, and Turkey against the United States during 2018. The findings show that the Philippines and others in the sidelines could incur larger welfare losses than those directly involved in the conflict, in contrast with the sanguine prediction of other models.