Impact of temporary trade barriers: Evidence from China

- Temporary trade barriers (TTBs) such as antidumping duties and countervailing have increased recently.
- This paper investigates effect of the US temporary trade barriers on Chinese exports.
- The results indicate US TTBs deflect Chinese exports to other countries by as much as 15 percentage points.
- This trade deflection is higher for non-steel products and is primarily along intensive margin.
- However, US TTBs directed against Chinese trade partners do not necessarily reduce Chinese exports to these markets.

With a decrease in tariffs around the world, temporary trade barriers (TTBs) have increased dramatically to take their place. These TTBs are usually in the form of antidumping duties, countervailing duties and global safeguards. Recently, an increasing number of these TTBs have been targeted towards China. In this paper, I explore the impact of the US temporary trade barriers (TTBs) on Chinese exports. Using detailed product level data for the period 2002-2008, I find robust evidence of trade deflection i.e. the US trade barriers against China led to an increase in the growth of Chinese exports to other countries. However, I do not find any evidence of trade depression. The results are robust to a wide variety of specification and robustness tests. While I do not find any difference in the impact of TTBs across developed and developing countries, there is considerable heterogeneity in response to TTBs depending on the type of products involved. Specifically, I find that, while the US TTBs on non-steel products lead to an increase in Chinese exports of those products to third markets, there is a significant chilling effect in case of steel. Finally, most of the trade-deflection seems to be along the intensive margins i.e. an increase in exports to the existing third country markets rather than exports to new markets. If anything, the US TTBs on China seem to decrease Chinese exports to newer and more volatile markets.