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