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TDPE presents: Kyle Handley

341 Eggers Hall

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Kyle Handley, Assistant Professor of Business Economics and Public Policy, University of Michigan

Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S.

We assess the impact of U.S. trade policy uncertainty (TPU) toward China in a tractable general equilibrium framework with heterogeneous firms. We show that increased TPU reduces investment in export entry and technology upgrading, which in turn reduces trade flows and real income for consumers. We apply the model to analyze China's export boom around its WTO accession and argue that in the case of the U.S. the most important policy effect was a reduction in TPU: granting permanent normal trade relationship status and thus ending the annual threat to revert to Smoot-Hawley tariff levels. We construct a theory-consistent measure of TPU and estimate that it can explain between 22-30% of Chinese exports to the US after WTO accession. We also estimate a welfare gain of removing this TPU for U.S. consumers and find it is of similar magnitude to the U.S. gain from new imported varieties in 1990-2001.

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Sponsored by the Trade Development and Political Economy Program at the Moynihan Institute of Global Affairs


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Exterior of Maxwell in black and white when there was no Eggers building

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To mark our centennial in the fall of 2024, the Maxwell School will hold special events and engagement opportunities to celebrate the many ways—across disciplines and borders—our community ever strives to, as the Oath says, “transmit this city not only not less, but greater, better and more beautiful than it was transmitted to us.”

Throughout the year leading up to the centennial, engagement opportunities will be held for our diverse, highly accomplished community that now boasts more than 38,500 alumni across the globe.