Spatial equilibrium analysis of Chinese tariff on world cotton markets

We develop a theoretical and an empirical spatial equilibrium model (SEM) to analyse the effects of the 25% Chinese cotton tariff on United States, Chinese and world markets. The tariff causes US cotton price, production and exports to decrease, while simultaneously increasing China's price and production. The SEM determines the trade reallocations caused by the Chinese tariff. The United States diverts some of its exports to other importing countries, which allows the United States to mitigate some of its losses. Other cotton exporters increase their exports to China at the expense of the United States.