The United States–China trade war and economic growth in the Asia-Pacific region: Evidence from APEC economies

Abstrak

In an open economy, global uncertainties such as trade wars can affect regional economic stability. This study analyses the relationship between the United States–China trade war and economic growth in the Asia-Pacific region from 2000 to 2024. Specifically, it examines the short-run and long-run relationships of economic growth with exports, foreign direct investment (FDI), and household final consumption, while incorporating a trade war period dummy in the short-run specification. The study contributes to the literature by examining the dynamic role of household consumption alongside exports and FDI using the Pooled Mean Group Autoregressive Distributed Lag (PMG-ARDL) approach across nineteen APEC economies. The results provide evidence of a long-run equilibrium relationship, while the negative and statistically significant error correction term indicates convergence toward equilibrium. In the long run, exports are positively and significantly associated with economic growth, whereas FDI and household final consumption are negatively and significantly associated with economic growth. In the short run, exports, FDI, and household final consumption are positively and significantly associated with economic growth, while the trade war dummy variable is statistically insignificant. This result indicates that the estimated model provides no evidence of a direct aggregate association between the U.S.–China trade war period and economic growth across the sampled APEC economies. Overall, the findings highlight distinct short-run and long-run relationships between economic growth and trade, investment, and domestic demand during a period of heightened United States–China trade tensions, while the common trade war period dummy shows no statistically significant short-run association with economic growth.