In this paper we develop a stylized model of international trade and firm mobility to study how a country with cost disadvantages should design its tariff and subsidies policies in an increasingly fragmented world economy. We consider a setting with imperfect competition and strategic interaction between domestic and foreign firms, where there is room for using subsidies as well as tariffs to maximize national welfare. Firms are internationally mobile, but mobility is costly. If the rest of the world increases subsidies or tariffs, the optimal response generally depends on the specifics of the market under consideration, but in many cases it is nationally optimal to respond by reducing, not increasing domestic subsidies and tariffs.

This paper examines the impact of the 2018 US solar panel tariffs, both China specific and global, on Chinese solar exports. Unlike previous studies which focused on importers, this paper adopts the exporter’s perspective. This allows a direct analysis of how trade policy shocks influence Chinese exports across regions. Using panel data covering exports from China to 193 countries, the analysis applies a gravity model with high-dimensional fixed effects and a heterogeneous treatment design to capture regional differences. The study evaluates the effects on the United States and seven other regions, with a particular focus on ASEAN. The results show that US tariffs significantly reduce Chinese exports to the United States while triggering trade diversion toward alternative markets, with ASEAN and other emerging economies emerging as key beneficiaries. These findings align with prior literature showing that emerging markets often gain from trade policy interventions in industrialized countries.

This paper studies whether tariffs can affect the equilibrium world real interest rate by redistributing income across regions and cohorts with different propensities to save. We analyze this question in a parsimoniously calibrated three-region Blanchard-Yaari overlapping-generations model with trade in differentiated goods, endogenous net foreign asset positions, and a world real interest rate determined by global asset-market clearing. The long-run response of r* depends critically on how tariff revenue is recycled across domestic cohorts. Recycling tariff revenue more strongly toward retired households lowers aggregate saving and raises r*, whereas recycling it more strongly toward working-age households attenuates this effect and can reverse it.

This study investigates how local governments in China strategically deploy tax incentives to support firms with robust economic performance, fostering a symbiotic government-business relationship to advance local development objectives. Using firm-level data from the National Tax Survey, we find that sub-national governments tend to lower the effective tax rates for prominent local firms that make significant contributions to the local economy. This preferential treatment is more pronounced among local officials who face stronger career incentives or heightened pressure to promote economic growth. To address potential confounding factors such as political favoritism, tax avoidance strategies, or exclusive special deals, we employ quasi-experimental shocks and leadership turnover as identification strategies. Our findings also reveal a dual dynamic: while local business champions benefit from favorable tax policies, they are subjected to increased scrutiny, including a higher likelihood of tax audits and stricter penalties for tax evasion.