The other trade war: Quantifying the Korea-Japan trade dispute

Monday, February 7, 2022
Edward Balistreri
Yeutter Institute
Sangho Shin
Bank of Korea

Abstract

In mid-2019 a new trade war between Korea and Japan started heating up, while the U.S.-China trade war held the spotlight. This paper documents the recent Korea-Japan trade dispute and quantifies its economic impacts. We consider a set of non-tariff distortions—Japanese export controls combined with Korean boycotts of Japanese goods. We simulate the impact of these actions using a multi-region general equilibrium model calibrated to the GTAP version 10 accounts and observed trade responses in the Korea Customs Service data. We find a welfare loss of 0.144% ($1.0 billion) for Korea and 0.013% ($346 million) for Japan. Sectoral impacts include a 0.25% reduction in chemical production in Japan. In Korea the reduction in imports from Japan is offset by increases in domestic production and imports from other countries.

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About 
Edward Balistreri

Balistreri is the Duane Acklie Chair at the Yeutter Institute and an economics professor in the College of Business at the University of Nebraska-Lincoln. View biography.

About 
Sangho Shin

Shin is an economist with the International Economics Team at the Bank of Korea and is a former PhD student under Balistreri.