Besides tit for tat: The effect of US 301 tariffs on Chinese local government spending

•Local governments in china increased public spending in response to US 301 tariffs.•The increase in spending focused primarily on social security and employment.•The effect was stronger in cities with higher openness, lower fiscal pressure, and lower saving levels. Many studies have shown that the...

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Bibliographic Details
Published in:Economics letters 2024-11, Vol.244, p.112030, Article 112030
Main Authors: Pan, Jiafeng, Du, Te, Fang, Chao
Format: Article
Language:English
Subjects:
Government spending
Section 301 tariffs
Social security and employment
The US-China trade war
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Summary:•Local governments in china increased public spending in response to US 301 tariffs.•The increase in spending focused primarily on social security and employment.•The effect was stronger in cities with higher openness, lower fiscal pressure, and lower saving levels. Many studies have shown that the US-China trade war has harmed China's exports and economy. This paper analyzes whether local governments respond to US 301 tariffs through public spending. Using the variation of tariff exposure across cities, this paper finds that the tariff shock led local governments to increase public spending, mainly on social security and employment. Heterogeneity analysis indicates this effect was more pronounced in cities with higher openness, lower fiscal pressure, and lower saving levels. Robustness tests are provided.
ISSN:0165-1765
DOI:10.1016/j.econlet.2024.112030