FSS-DECO seminar: Dirty Trade War

Speaker: Prof. Haichao FAN, Professor of School of Economics, Vice Director of the Institute of World Economy, Fudan University

Date: 28 Nov 2025 (Friday)

Time: 14:00-15:15

Language: English

Venue: E21B-G035

Abstract: We examine the impacts of the U.S.-China trade war on global carbon emissions and welfare. Our reduced-form empirical analysis shows that U.S. tariffs on Chinese goods curtailed economic activity in China but had no significant impact on its carbon emissions. This outcome can be attributed to two mechanisms: the relaxation of environmental regulations and the reallocation of production from the exporting sector to the non-exporting sector. Additionally, the trade war raised global carbon emissions by shifting production from China to other developing countries, especially those with lower carbon efficiency. To assess the welfare implications, we develop a multi-country, multi-sector general equilibrium framework that incorporates emissions. Our analysis reveals that the rise in carbon emissions exacerbated the welfare losses for both China and the U.S., while diminishing the welfare gains for the rest of the world.