US-China Rivalry: The Macro Policy Choices

Speaker: Rod Tyers, University of Western Australia and The ANU

Date & time: 2pm to 3pm, Tuesday 28 May 2019

Venue: Griffin Room, Level 1, JG Crawford Building 132, Lennox Crossing, The ANU


Stylised representations of recent US and Chinese tax reforms, tariffs against imports, and alternative Chinese monetary targeting are examined using a calibrated global macro model that embodies both trade and financial interdependencies. For both countries, unilateral capital tax relief and bilateral tariffs are shown to be ‘beggar thy neighbour’ in consequence, with tariffs most advantageous for the US if revenue finances consumption tax relief. China is nonetheless a net loser when these policies are implemented unilaterally by the US, irrespective of its policy response, though a currency float is shown to cushion the effects on its GDP in the short run. Equilibria in normal form non-cooperative tariff games exhibit spill-overs that are substantial but insufficient to deter dominant strategies. The US imposes tariffs while China liberalises, sustaining fiscal balance via consumption tax relief in the US and via expenditure constraint in China.

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On the blog

Automation and Income Inequality in a World of International Rivalry, by and (19 March 2019).

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