撤销中国永久正常贸易关系（PNTR）地位的经济影响（英）

pllE

PETERSONINSTITUTEFOR

INTERNATIONALECONOMICS

POLICYBRIEF

24-9Economicimplicationsof

revokingChina’spermanentnormaltraderelations(PNTR)status

MeganHogan,WarwickMcKibbin,andMarcusNoland

September2024

Authors’Note:WethankJingYan,JulietaContreras,RoshenFernando,andGeoffreyShuetrimfortechnicalsupport;GaryHufbauer,MauriceObstfeld,AdamPosen,andAlanWolffforhelpfulcomments;andAndrewStoeckelforinsightfuldiscussions.

In2000,theUnitedStatesgrantedChinapermanentnormaltraderelations

(PNTR)status(formerlyknownasmostfavorednationstatus)inconnectiontoChina’saccessiontotheWorldTradeOrganization(WTO).ChinahadoriginallybeensubjecttotheonerousColumn2

(Smoot-Hawley)tariff

schedule,buttheyhadbeenwaivedsince1980.

ThegrantingofPNTRandtheendoftheannualwaiverrenewalprocess

reducedtheuncertaintyassociatedwithChina’stradestatusandledtosignificantexpansionsofforeigndirectinvestmentintoChinaandinternationaltrade

(HandleyandLimao2017).SinceChinajoinedtheWTOin2001,ChineseexportstotheUnitedStateshaveincreasedbymorethan300percent,nearlydoubletherateforimportsfromothersources—despitetherecentongoingbilateraltrade

war.TopcategoriesofUSimportsfromChinaincludemachineryandelectrical

machinery,furniture,textiles,andvariouslightmanufactures.Thisimportgrowthledtoconsiderabledisplacement—includinglossesofjobs,factories,andoutput—inUSsectorscompetingwithChineseimports(Autor,Dorn,andHanson2013).1

Thatdislocation,togetherwithothersocialchangesandconcernsabout

China’stradepractices,generatedapoliticalbacklashintheUnitedStates

(Autor,Dorn,Hanson,andMajlesi2020;Noland2020)andinrecentyearsfueledinterestinrevokingChina’sPNTRstatus.In2023,RepublicansintheUSHouse

andSenateintroducedabill,the“ChinaTradeRelationsActof2023,”butitdiedincommittee.In2024,asimilarbillwasintroducedintheHouse.Alsoin2024,

1USexportstoChinaalsoincreaseddramaticallyduringthisperiod(by668percent,comparedwith176percentforUSexportsoverall),withgrowthconcentratedinagriculture,machineryandelectricalmachinery,oilandgas,andopticalandmedicalequipment.

MeganHogan

wasaresearchfellowatthePetersonInstituteforInternationalEconomics

untilAugust2024.ShejoinedtheInstituteasaresearch

analystinAugust2021andwastheErandaRothschildFoundationJuniorFellowduring2022–23.

WarwickJ.McKibbin

,

nonresidentseniorfellow

atthePetersonInstitutefor

InternationalEconomics,is

DistinguishedProfessorof

EconomicsandPublicPolicyanddirectoroftheCentre

forAppliedMacroeconomicAnalysisintheCrawford

SchoolofPublicPolicyattheAustralianNationalUniversity.

MarcusNoland

,executive

vicepresidentanddirectorofstudiesatthePeterson

InstituteforInternational

Economics,hasbeen

associatedwiththeInstitutesince1985.From2009

through2012,heservedastheInstitute’sdeputydirector.Heisalsoaseniorfellowatthe

East-WestCenter.

1750MassachusettsAvenue,NW|Washington,DC20036-1903USA|+1.202.328.9000|

PB24-9|SEPTEMBER20242

formerpresidentandRepublicanpresidentialcandidate

DonaldTrump

andthe

RepublicanPartyPlatform

expressedplanstorevokeChina’sPNTRstatus.Thenotionhasreceivedsomebipartisansupport:IntheHouseSelectCommittee

ontheStrategicCompetitionbetweentheUnitedStatesandtheChinese

CommunistParty’s(SelectCommitteeontheCCP’s)annualreporttoCongress,theleadrecommendationwastorevokeChina’sPNTRstatusifCongress

determinedthatChinafailedtomeetitsWTOobligations.

InthisPolicyBrief,weexaminewhatarevocationofChina’sPNTRstatus

mightmeanfortheUnitedStates,China,andothercountriesusingG-Cubed,

amulticountry,multisectorhybriddynamicstochasticgeneralequilibrium–

computablegeneralequilibriummodel(McKibbinandWilcoxen1999,2013).WefindthatrevokingChina’sPNTRstatuscausesashort-termdeclineinUSGDP

relativetobaselinefromwhichtheeconomyneverfullyrecovers.Theoverall

declineinoutputandemploymentfeltunevenlyacrosstheeconomy,with

agriculture,durablemanufacturing,andminingtakingthebiggesthits.Inthe

longrun,workersdisplacedbythechangeshiftintoservicesemployment(withlowerrealwagesacrosstheeconomy),butgiventhegeographicremotenessofsomeagriculturalandminingactivities,thisadjustmentmaynotbeassmoothasdepictedbythemodel.Inflationrisesby0.2percentagepoints(0.4percentagepointsifChinaretaliates)inresponsetotheimpositionofadditionaltariffs,whichraisesboththepriceofimportedgoodsforfinalconsumptionandthepriceof

importedintermediateinputsusedindomesticproduction.Stockmarketpricesfall,withfirmsinagriculture,durablemanufacturing,andminingabsorbingthebiggestdeclines.AlloftheseimpactsaremagnifiedifChinaretaliates.Ironically,thepolicydamagestheUSindustrialsectorandcontributestoawidening

oftheUStradedeficit—theexactoppositeofwhatproponentsofthispolicyintendtoachieve.

MODELINGPNTRREVOCATION

TheG20versionoftheG-CubedmodelusedinthisPolicyBriefincludestheG20economiesplusfourregions(table1).Themodelincludesstandardfeaturesof

largemacromodels,includingthefollowing:

•intertemporalgeneralequilibriumwithstandardoptimization,

•rigidities,suchaslimitsonthepaceofinvestment,thatpreventeconomiesfrommovingquicklyfromoneequilibriumtoanother,

•cross-bordercapitalandtradeflowsandbilateralcross-borderinputlinkages,

•heterogeneoushouseholdsandfirms,

•conventionalforward-lookingagentsandafractionofhouseholdsthat

consumetheircurrentincomeandafractionoffirmsthatmakebackward-lookinginvestmentdecisions,and

•monetaryandfiscalpolicyrules.

Themodelalsoincorporatesafull-fledgedexternalsector.Intertemporal

decisionsofhouseholdsandfirmsdeterminebothsavingandinvestmentin

responsetogovernmentpolicychanges.Thegapbetweenaggregatesavingandinvestmentdeterminesthecurrentaccount.Akeyvariableaffectingnational

PB24-9|SEPTEMBER20243

Table1

TheG-CubedModel(GGG6G_v179)

Regioncode

Country/region

Structure

ARG

Argentina

Sectors

AUS

Australia

Energy

BRA

Brazil

Mining

CAN

Canada

Agriculture

CHN

China

Durablemanufacturing

DEU

Germany

Nondurablemanufacturing

EUZ

Restofeurozone

Services

FRA

France

GBR

UnitedKingdom

IDN

Indonesia

EconomicActors

IND

India

Consumers

ITA

Italy

Firmsineachsector

JPN

Japan

Government(fiscalpolicy)

KOR

Korea

Centralbanks

MEX

Mexico

OAS

RestofAsia

Markets

OEC

RestoftheOECDcountries

Goodsandservices

OPC

Otheroil-producingcountries

Primaryfactorsandintermediategoods

ROW

Restoftheworld

Money,bonds,equities,foreignexchange

RUS

Russia

SAU

SaudiArabia

TUR

Turkey

USA

UnitedStates

ZAF

SouthAfrica

OECD=OrganizationforEconomicCooperationandDevelopment

Source:TheG-CubedModel(GGG6G_v179),

/gcubed/version/6G/

.

PB24-9|SEPTEMBER20244

saving,investment,andcurrentaccountsistherealinterestrate,whichdirectlyaffectsbothsavingandinvestmentdecisionsandhumanwealththrougha

discountingchannel.Thetradebalanceisthecurrentaccountadjustedby

netfactorincomefromforeigners.2FlexibleexchangeratesandopencapitalaccountsareassumedforallcountriesandregionsexceptChina,whichhasacrawlingpeg.

Ineacheconomy,thecentralbanksfollowrulesforsettingpolicyinterest

ratesthatreflectthestandardHenderson,McKibbin,Taylorrules(Henderson

andMcKibbin1993,Taylor1993),withdifferentweightsonoutputgapsand

inflationrelativetotargetsineachcountry.FortheFederalReserve,weassumestandardTaylorcoefficientswithequalweightsoninflationrelativetotargets

andtheoutputgap.Insomecountries,suchasChina,wealsoweightthechangeintheexchangerate,toslowtheappreciationordepreciationoftheyuan.Thisassumptionaboutmonetarypolicyhasthegreatestimpactontheeconomyin

theinitialyearsofthetradeshock.

Inprinciple,revocationofPNTRwouldmovetradewithChinafromthe

conventionalColumn1tariffscheduletothefarmorerestrictiveColumn2tariffschedule(table2).WithmostChineseimportstotheUnitedStatesnowundersomeformofspecialprotection,however,thismarginalchangeoverstatestheprotectiveimpactofPNTRrevocation.3

ItisalsopossiblethatinthelegislationrevokingPNTR,Congressmight

givethepresidenttheauthoritytoapplyratesuptotheColumn2rate(orevenfarther).Inthefirstofits150recommendations,thebipartisanSelectCommitteeonStrategicCompetitionbetweentheUnitedStatesandtheChineseCommunistPartyimpliesthattariffscouldberaisedtosomethingshortofthefullSmoot-

Hawleylevel.BoththecommitteeandsomeotherCongressionalcommentariessuggestthatthemovecouldbeinterpretedasanegotiatingstrategythat

couldbereversedifChinaweretomakesufficientconcessions.4Thatsaid,onceinplace,protectioncreatesapoliticaleconomyforitsperpetuation.Forthe

purposesofthisexercise,theimpositionoftheColumn2scheduleisadefensiblemodelingscenario.5Wesolvethemodelfor2018–2100,with2018asthebase

year.Thekeyinputsintothebaselinearetheinitialdynamicsfrom2017to2018andprojectionsfrom2018onwardforsectoralproductivity(ortechnological)growthratesbysectorandcountry.Theexogenousdriverofeconomicgrowth

2Weallowforvaluationeffectsonforeigndebtwhentherealexchangeratechanges.AllUSforeigndebtisassumedtobeinUSdollars.Ifthedollarappreciates,thevolumeofexportsbytheUnitedStatesrequiredtoservicetheoriginalstockofforeigndebtthereforedeclinesrelativetofutureimports.

3SmithandLee(2023)andOxfordEconomics(2023)alsomakethismodelingassumption.

4Congressshould“MovethePRCtoanewtariffcolumnthatrestoresUSeconomicleverage

toensurethatthePRCabidesbyitstradecommitmentsanddoesnotengageincoerciveor

otherunfairtradepracticesanddecreasesUSrelianceonPRCimportsinsectorsimportantfornationalandeconomicsecurity.Thisshiftshouldbephasedinoverarelativelyshortperiodoftimetogiveoureconomythetimenecessarytoadjustwithoutavoidabledisruptions”(HouseSelectCommitteeontheStrategicCompetitionBetweentheUnitedStatesandtheChinese

CommunistParty2022,14).

5“TocountermaligninfluenceandtheftperpetuatedbythePeople’sRepublicofChinaandtheChineseCommunistParty”(HR7476),the2024ChinesePNTRrevocationbillincludes“fast-trackauthority”forlegislationtodevelop(andlaterlevy)anewtariffscheduleforimports

fromChina.Absenttheenactmentofsuchlegislation,the

bill

wouldimposeColumn2tariffratesonimportsfromChina.

PB24-9|SEPTEMBER20245

Table2

Increasesinweighted-averagetariffsafterrevocationofChina’spermanentnormaltraderelationsstatus,bysector

Sector

Tariffchange

(percentagepoint)

Nondurablemanufacturing

42.9

Durablemanufacturing

36.9

Agriculture,forestry,fishing,andhunting

24.5

Mining

5.7

Energy

1.1

Source:ConstructedbytheauthorswithdatafromtheUSCensus(viaDataweb).

foreachcountryissectoralproductivitygrowth.Growthinthecapitalstockisdeterminedendogenouslywithinthemodel.

Basedontheseassumptions,weproduceabaselineforalleconomies.

ProductivityintheUnitedstates—theworld’stechnologyfrontier—isassumed

togrowconstantlyintothefuture;othereconomiesclosetheirgapsatthe

sectorlevelwiththeUnitedStatesbasedonaproductivitycatchupmodel.As

emerging-marketeconomieshavelowinitialtechnologylevelsrelativetothe

UnitedStates,theyenjoyrapidtechnologicalprogressandhencebriskeconomicgrowth.Thisproductivitycatchupalonewillsignificantlychangethelandscapeoftheworldeconomythiscentury.

Giventhebaseline,wethenassumetheannouncementoftherevocationofChina’sPNTRstatusin2025,adecisionweassumetobepermanent.PierceandSchott(2016)andHandleyandLimao(2017)documentthattheeliminationof

uncertaintyassociatedwiththeannualrenewalprocesscontributedtoaboostinUStradewithChina,independentofanytariffcutting.The“permanent”natureofthechangeincentivizedUSfirmstoestablishoperationsinChinaordeepen

theircooperationwithChinesefirms,shiftingproductionfromtheUnitedStatestoChina.ItalsoencouragedUSproducerstoinvestincapital-orskill-intensivemodesofproductionwhiletransferringmorelabor-intensiveactivitiestoChina.

OntheChineseside,PNTRincentivizedenterprisestoinvestin,orexpandresourcesdevotedto,salesintheUSmarket.Inprinciple,thismovewould

sendthesortoftrade-biasedinvestmenteffectsthatPierceandSchott(2016)andHandleyandLimao(2017)documentintoreverse(wedonotmodelthesespecificchannels).Wealsoassumethattherevenuefromthetariffincrease

(0.9percentofGDP)wouldbepaidtotheUSgovernment,reducingthefiscaldeficit.6

Theresultswepresentarethedifferenceintheoutcomesofeconomic

variablesrelativetothebaselineprojections.Wealsomodelaretaliation

scenario,inwhichChinarespondswiththesametariffchangestheUnitedStates

6Alternatively,onecouldassumethatthetariffrevenueisrebated.ArebatewouldattenuatethecontractionofGDP,production,andemployment.

PB24-9|SEPTEMBER20246

imposesonChineseimports(seetable2).Chinacouldretaliateinotherways;forconcreteness,weassumethissimpletit-for-tat.

RESULTSOFTHEMODELING

Figures1–7displaytheeffectofrevokingPNTRontheeconomiesofthe

UnitedStates,China,Canada,Europe,Japan,andMexicowithandwithout

retaliationbyChina.Thefullsetofresultsforallcountriescanbedownloadedfromthe

dashboard

.

RevokingPNTRwouldincreasethepriceofimportsintheUnitedStates

throughthedirectimpactoftariffsonprices.AlthoughChineseproducerswouldabsorbthedeclineinthepricetheyreceiveafterthetariff,thatabsorption

wouldnotoffsettheriseinthetariffonthepriceofChinesegoodsintheUnitedStates.TheamountofforeigncurrencyneededtopaytheChinesefortheir

exportswouldreducedemandforChinesecurrency,causingtheUSdollartoappreciaterelativetotheyuan,by6percentintheshortrun.ThehigherpricesfromthetariffarethuspartlyoffsetbyappreciationoftheUSdollar.ImportersofconsumergoodsandintermediategoodswouldswitchawayfromChineseimportstoimportsfromothercountriesandUS-producedgoods.

IntermsofGDP,revocationofPNTRwouldleadtoadeclineinincomeintheUnitedStatesandamorepronounceddeclineinincomeinChina(figure1).ThedeclineinUSGDPwouldbeintensifiedifChinaretaliatedbylimitingaccesstomarketsinChina.7Chinawouldbeaffectedbythetariffandbypartlypegging

theexchangerateresponsebyraisinginterestratestoprotecttheyuan,whichwouldcauseamonetary-inducedslowdownthatacceleratesthenegativetradeshockinChina.China’sGDPwoulddeclineby0.6percentin2025.8IftheBankofChinaallowedthenominaldepreciationofthecurrency,thisinitiallosswouldbehalved.Overtime,productionwouldshiftfromChinatoothercountries,

includingCanadaandMexico,leadingtoslightlylowerlong-runGDPinthe

UnitedStatesandanevengreaterdeclineinChina.TheoutcomesforaggregateemploymentaresimilartotheGDPresults(figure2).

Theimpositionofhighertariffswouldincreasepricesforconsumerand

intermediategoods,contributingtoariseinUSinflationof0.2percentagepointsin2025(0.4percentagepointsifChinaretaliates)(figure3).AlthoughtheFed

wouldeventuallyremovetheinflationaryimpulse,thepricelevelwouldremain0.4percentagepointshigherforever(0.6percentagepointshigherifChina

retaliates).Atthesametime,theappreciationoftheUSdollarwouldreducethepriceofimportedgoodsfromothercountriesanddampensomeofthedirect

impactsofthetariffincreaseonpricelevels.Onnet,theincreaseininputcostsintheUnitedStateswouldleadtoinflation.TheFedwouldbalancethedeclineineconomicgrowthwiththeriseininflationandallowsomeoftheinflationary

7ThedeclineinUSGDPissomewhatlargerthanobtainedbySmithandLee(2023)using

astaticCGEmodelandsomewhatsmallerthanobtainedbyOxfordEconomicsusinga

traditionalmacromodelinastudycommissionedbytheUS-ChinaBusinessCouncil(2023).

SmithandLeealsoobtainadeclineinChineseGDP,albeitofasmallermagnitude.BothSmithandLeeandOxfordEconomicsfindthatretaliationbyChinawouldintensifyallofthese

effects.

8TheinitialresponseofChineseGDPdependsimportantlyonthereactionofthePeople’sBankofChinatothedepreciationoftherenminbirelativetotheUSdollar.Ifittightensmonetary

policytomaintainapegtotheUSdollar,China’sGDPcoulddeclinebyasmuchas1.6percentin2025.

PB24-9|SEPTEMBER20247

Figure1

ProjectedGDPfollowingrevocationofChina’spermanentnormaltraderelationsstatus,2025–40

a.ChangeinrealGDPinselectedcountries

percentdeviationforeachyear

0.2

0.1

0

–0.1

–0.2

–0.3

–0.4

–0.5

–0.6

Mexico

Germany

Canada

UnitedStates

Japan

China

–$442billioncumulative

changeintheUnitedStatesthrough2040

202420262028203020322034203620382040

b.ChangeinUSGDPwithandwithoutretaliationbyChina

0.05

0

–0.05

–0.10

–0.15

–0.20

–0.25

percentdeviationforeachyear

Withoutretaliation

Withretaliation

202420262028203020322034203620382040

Source:Authors’calculations.

impulsetopassthroughtotheeconomy.Itwouldinitiallyallowthepolicyratetoriseslightlywithinthe25-basis-pointbandbutthenpermanentlyreducetherateslightlywithinthesameband.ThetariffchangewouldbedeflationaryinChina

(withashort-runspikein2026–27)becauseofthedeclineindemandforChineseexportsandthetighteningofChinesemonetarypolicytoresistchangeinthe

exchangeraterelativetotheUSdollar.9

9ThesepriceincreasesintheUnitedStatesarelowerthanthoseobtainedbySmithandLee’s

staticCGEmodel,whichgeneratesasignificantincreaseinimportpricesfromallsources.OnedifferenceisthatG-CubedcapturestheappreciationoftheUSdollar,whichdepressesdollarimportpricesfromnon-Chinesesources.

PB24-9|SEPTEMBER20248

Figure2

Projectedemployment(hoursworked)followingrevocationofChina’spermanentnormaltraderelationsstatus,2025–40

a.Changeinhoursworkedinselectedcountries

0.2

0

–0.2

–0.4

–0.6

–0.8

–1.0

–1.2

–1.4

percentdeviation

Germany

Mexico

itdtt

Japan

Canada

UneSaes

China

202420262028203020322034203620382040

b.ChangeinhoursworkedintheUnitedStateswithandwithoutretaliationbyChina

percentdeviation

0.05

0

–0.05

–0.10

–0.15

–0.20

–0.25

–0.30

Withoutretaliation

Withretaliation

202420262028203020322034203620382040

Source:Authors’calculations.

Themacroeconomicstoryisconventional;theimpactonsectorsisdiverse.Differencesinsectoraloutcomesarecausedbythedifferenttariffchanges

(whicharemuchlargerinmanufacturing;seetable2),theproductionstructuresineachsector(includingcapital-laborratiosanddependenceonintermediate

goods),andtherelativeimportanceofforeignversusUSdemandfortheoutputofeachsector.

Figure4showsthepercentagechangeinsectoralproductionintheUS

economy.PanelashowstheimpactoftheUStariffchanges;panelbshowstheimpactofthetariffchangesplusChineseretaliation.Thethreesectorswiththelargestdeclinesinoutputin2025andthelongrunarethosethatareexposedto

PB24-9|SEPTEMBER20249

Figure3

ProjectedinflationfollowingrevocationofChina’spermanentnormaltraderelationsstatus,2025–40

a.Changeininflationrateinselectedcountries

percentagepointdeviation

0.25

0.20

0.15

0.10

0.05

0

–0.05

–0.10

–0.15

UnitedStates

China

Canada

Japan

Germany

Mexico

202420262028203020322034203620382040

b.ChangeinUSinflationratewithandwithoutretaliationbyChina

percentagepointdeviation

0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0–0.05

Withretaliation

Withoutretaliation

202420262028203020322034203620382040

Source:Authors’calculations.

trade:agriculture(–1.4percent),durablemanufacturing(–1.2percent),andmining(–1.1percent).Agricultureisadverselyaffectedbytheappreciationofthedollar,whichreducesforeigndemandforUSexports.Thedeclinesindurablesand

miningarecausedpartlybythecontractionofinvestment.ManufacturingsuffersbecauseofitsdependenceonChinaasasourceofintermediateinputs.The

lossesinagricultureanddurablemanufacturingnearlydoubleifChinaretaliates,becausetheyarebothdirectlyexposedtotrade,anddurablegoodsarealso

exposedtoaninvestmentslowdowninbothcountries;miningisnotasaffectedbyChineseretaliationbecauseoflowertradeexposure.Themodelembodiesasignificantdegreeofaggregation(sixsectors);itconsequentlyunderstatesthe

PB24-9|SEPTEMBER202410

Figure4

ProjectedoutputbysectorintheUnitedStatesfollowingrevocationofChina’spermanentnormaltraderelationsstatus,2025–40

a.OutputwithoutretaliationbyChina

percentdeviation

0.5

0

–0.5

–1.0

–1.5

–2.0

–2.5

Services

Nondurable

manufacturing

Energy

Durable

manufacturing

Mining

Agriculture,fishing,andhunting

202420262028203020322034203620382040

b.OutputwithretaliationbyChina

percentdeviation

0.5 0–0.5–1.0–1.5–2.0–2.5–3.0–3.5–4.0

Mining

Durablemanufacturing

Services

Energy

Nondurable

manufacturing

Agriculture,fishing,andhunting

202420262028203020322034203620382040

Source:Authors’calculations.

trueimpactofrevokingPNTRbynotfullycapturingtheefficiencylossesthatwouldbefeltatamoregranularlevel.

Thedeclineindemandforoutputfromeachsectorwouldbemirroredbythedeclineinthedemandforlaborineachsector.Initially,mostjoblosseswould

beinagriculture,mining,anddurablemanufacturing(figure5).Overtime,theseunemployedworkerswouldbeabsorbedintotheservicessector,througha

fallinrealwagesacrosstheUSeconomy.Theremotenessofsomeagriculture

andminingactivitiescouldimpedethisprocess,generatingsomewhatmore

negativeresultsthanthosedepictedinfigure5.RetaliationbyChinawould

increasejoblossesacrosstheeconomybutespeciallyinagricultureanddurablemanufacturing—theverysectorsthenewtariffsareintendedtosupport.

PB24-9|SEPTEMBER202411

Figure5

ProjectedsectoralemploymentintheUnitedStatesfollowingrevocationofChina’spermanentnormaltraderelationsstatus,2025–40

a.EmploymentwithoutretaliationbyChina

hoursworked,percentdeviationforeachyear

0.5

0

–0.5

–1.0

–1.5

–2.0

Agriculture,fishing,andhunting

Services

Nondurable

manufacturing

Durable

manufacturing

Energy

Mining

202420262028203020322034203620382040

b.EmploymentwithretaliationbyChina

hoursworked,percentdeviationforeachyear

0.5

0

–0.5

–1.0

–1.5

–2.0

–2.5

–3.0

–3.5

Durablemanufacturing

Services

Nondurable

manufacturing

Energy

Mining

Agriculture,fishing,andhunting

202420262028203020322034203620382040

Source:Authors’calculations.

TheimpositionoftariffsandretaliationbyChinawouldimmediatelyaffect

thestockmarketpricesofthesectorsmostaffected.Thevalueofequitieswould

declineby3percenteachinthemininganddurablemanufacturingsectors(figure6a).Retaliationwouldpushtheselossesupto5percentindurablemanufacturing(becauseofsignificantlossofexportstoChina)andupto4.5percentinagricultur