The Unintended Environmental Impacts Of Sino US Trade War

Under the scenario of tariff increase in the recent trade protectionism,this paper takes the 2018 US tariff incident as a quasi-natural experiment to explore the impact of trade protectionism on China’s environmental pollution based on the perspective of the Sino-US trade war.In 2018,without any trade negotiations,the Trump administration unilaterally raised tariffs ranging from 10% to 25% on Chinese imports products worth about $250 billion.The magnitude of the tariff increases and the range of industries covered by the tariffs are unprecedented.This paper firstly constructs an index to reflect the impact of a prefecture’s average tariff increase using customs data in 2015 and tariff increase data in 2018.Since the focus of this paper is on environmental results,we further use industry pollution intensity data to construct an index that can reflect the impact of a prefecture’s tariff increases on polluting industries.The baseline empirical results of this paper and the event study strategy show that the environmental consequences of trade protection are asymmetric,which means that trade protection does not bring about improvements in environmental outcomes.Our results show that a 10% increase in the impact of tariffs in prefectures will lead to a 0.4% increase in air pollution in China,and the result of the deterioration in air pollution is induced by the polluting industries.A series of robustness tests show that our result is robust.In terms of mechanism analysis,this paper uses the air quality improvement goals in the fall winter and the frequency of words related to "pollution control" in the government work report to represent the environmental regulation of a prefectures.we show that prefectures exposed to a rise in US import tariffs for polluting industries are more likely to receive lower regulation targets,thus leading to the worsen in air pollution.In the meantime,our regression of production-side and economic development data supports the establishment of this mechanism.We find that the increase in tariffs leads to the expansion of production in polluting industries and the contraction of production in clean industries.The negative economic impact of Trump’s tariffs has made it possible for local governments to adjust environmental policies.A10% increase in the impact of import tariffs in prefectures will lead to a decrease in GDP growth rate and nighttime lighting by 0.8% and 0.7% respectively.The above empirical results show that Sino-US trade is not only detrimental to China’s economic welfare,but also to environmental welfare.In order to reasonably respond to the Sino-US trade war,China should further adhere to reform and opening up,promote the process of trade liberalization,accelerate the negotiation of free trade areas,and reduce the economic and trade impact of US trade protection by expanding trade partners to reduce dependence on US exports.In addition,in global trade negotiations,countries should actively negotiate and communicate,rather than formulate trade policies unilaterally,so as to facilitate the development of global economic and trade cooperation and prevent other unintended impacts other than economic and trade impacts.