The US trade dispute: blunt offense or rational strategy?

ABSTRACT

This article evaluates the recent protectionist US trade policy and the retaliation of the EU and China. The article employs a New Quantitative Trade Theory model and an Armington model for comparison. The simulation results show that US car tariffs are a credible threat to the EU, but the steel and aluminum tariffs are not. China suffers considerably from the US tariffs, especially the latest extended, tightened tariffs. The retaliation measures of the EU and China, however, do not cause significant US welfare losses compared to the situation without mutual trade policy.

KEYWORDS:

• Trade policy
• trade war
• international organizations
• numerical models
• USA
• EU
• China

JEL CLASSIFICATION:

• F11
• F13
• F17
• F42

Acknowledgments

We thank Frank Pothen for his valuable help.

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ The data can be purchased from the Global Trade Analysis Project (GTAP), https://www.gtap.agecon.purdue.edu/default.asp.