Friction or cooperation? Boosting the global economy and fighting climate change in the post-pandemic era

Abstract

In the post-COVID-19 pandemic era, the world faces a choice between trade protection and cooperation. However, current literature provides very little information on the benefit or loss of trade friction or cooperation on global economy and climate mitigation. This study applied the Global Trade Analysis Project model to assess the impacts of trade friction on global economic recovery and climate change. The results indicated that international trade friction can both delay global economic recovery and affect CO2 emission reduction. The shocks of consumption reduction and production suspension have a higher marginal effect in developing and emerging economies, whereas trade friction has a higher effect on developed countries. Trade friction has more negative economic effects for developed countries, but developing countries cannot reduce CO2 emissions proportionally with the decrease in trade and related production. In the post-pandemic era, if the global trade barrier increases, the world may face a co-occurring economic decline and an increase in or low abatement of carbon emissions.