Yeutter Institute of International Trade and Finance
Date of this Version
10-2-2024
Document Type
Article
Citation
Yeutter Institute International Trade Policy Review (October 2, 2024)
Abstract
We use an advanced model of the global economy to consider a set of scenarios consistent with the proposal to impose a minimum 60% tariff against Chinese imports and blanket minimum 10% tariff against all other US imports. The model’s structure, which includes imperfect competition in increasing-returns industries, is documented in Balistreri, Böhringer, and Rutherford (2024). The basis for the tariff rates is a proposal from former President Donald Trump (see Wolff 2024). We consider these scenarios with and without symmetric retaliation by our trade partners. Our central finding is that a global trade war between the United States and the rest of the world at these tariff rates would cost the US economy over $910 billion at a global efficiency loss of $360 billion. Thus, on net, US trade partners gain $550 billion. Canada is the 2 only other country that loses from a US go-it-alone trade war because of its exceptionally close trade relationship with the United States.
We provide context in terms of the current trade conflict, primarily between the United States and China, and enumerate a set of scenarios based on the proposed blanket tariffs. Results suggest the United States is the biggest loser in a comprehensive trade war with the rest of the world. We also consider a potential transatlantic alliance, where Europe joins the United States in tariffs against China. Transatlantic cooperation reduces US losses and leads to sharp losses for China, highlighting the benefits of cooperation relative to the proposed go-it-alone strategy.
Included in
Agribusiness Commons, Economic Policy Commons, Finance Commons, International and Area Studies Commons, Regional Economics Commons
Comments
Copyright 2024, Yeutter Institute. Used by permission