Macroeconomic Policy Choice in the Context of Trade Disputes between China and the US

Abstract:

Free trade will inevitably face a decline in marginal benefits and rise in marginal costs; thus, it is not a sure choice. To date, the negative effect of the protectionist measures adopted by the United States (US) on China’s economy has been within an acceptable range; however, consideration needs to be given as to what type of responsive measures China could adopt in the future. In doing this, China’s policymakers should focus on: 1) adopting fiscal and monetary policies that maintain a stable aggregate demand; 2) reducing the effective import tax rate; 3) continuing to promote ‘opening up’ along with the ongoing China-US trade negotiations; 4) speeding up the time in which the service sector will be opened up to both foreign and domestic markets.

Keywords: trade disputes, macroeconomic policy

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