Trade Tension, Inflation and Output Growth in Asia-Pacific: A Dynamic Multivariate Panel Approach

Abstract

We analyze the macroeconomic impacts of trade tensions (TTs) related to the U.S. and China. We show that TTs lower output and prices when TTs are fully transmitted into domestic prices. We also find that the import channel is inflationary, while the export channel lowers the output growth of high-middle-income Asian economies when TTs are partially transmitted; the latter points to the need for strengthening export competitiveness and diversifying import-dependent production structures.