How Digital Transformation, Globalization, Economic Development and Eco-Friendly Energy Resources Reflect on International Trade in China and USA?

Purpose - In the digital era, international trade has been a key driver of economic growth in the 21st century, thanks to advances in internet technology. Many innovations and strategic initiatives have been attributed to the digital revolution and the resulting digital environment, which have had spillover effects on economic growth. We examined the relationship between international trade, digitalization, economic growth, globalization, and renewable energy using analytical data from China and the US spanning 1990 to 2021. Design/Methodology - Prior to the analysis, we employed pre-tests (such as unit root tests) to check the normality of the data and post-tests (such as heteroscedasticity, serial correlation, and the Ramsey RESET test) to assess the selected model’s goodness-of-fit. The autoregressive distributed lag model determined the short- and long-term relationships among the variables. The result of the bond test is significant at the 1% level, confirming the long-term relationship among the variables. Findings - International trade is positively related to DI, ED, and GBI in China, whereas ED and GBI are positively significant in the US. Renewable energy in both countries behaves negatively at the 1% level, and DI is negatively significant in the US only. The error correction term (ECT-1) verifies the negative significance of the speed of adjustment from short- to long-term equilibrium at the 1% level. The value of the ECT-1 term is -0.806 and -0.672 for China and the US, respectively, indicating that equilibrium can be achieved in more than one cyclical period. Originality/value - This study sheds light on the contributions of digital transformation to international trade, indicating the need for China and the US to adopt eco-friendly energy resources. At the same time, the US should be more concerned with digitalization. Increasing renewable energy sources can reduce the burden of environmental degradation and attract the attention of international traders.