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Macroeconomic and aggregate trade effects of trade conflict on and other regions in 2022 (in percent)
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The WTO Global Trade Model is employed to project the medium-run economic effects of a global trade conflict. The trade conflict scenario is based on recent estimates in the literature of the difference between cooperative and non-cooperative tariffs. The study provides three main insights. First, the projected macroeconomic effects in the medium r...
Contexts in source publication
Context 1
... 5.2 addresses the sectoral effects and Section 5.3 goes into the employment effects. Table 2 as well as Figures 1 to 3 display the simulated effects of a potential trade conflict on real income, real GDP, and the value and volume of exports. The global average decline in real GDP and the value of exports is projected to be respectively 1.96% and 16.95% in 2022 relative to the baseline. ...Context 2
... impact on the value of trade for the EU is positive, reflecting the fact that intra-EU trade will pick up when tariffs on exports outside of the EU increase. The model projects a fall in the value of exports from the EU to other regions (thus excluding intra-regional trade) of 32% (not displayed in the table). Given the large weight of the EU in global trade, the reduction in global trade would rise from about 17% to 26% when excluding intra-EU trade. ...Similar publications
The steel sector is strategically important for supplying necessary inputs to many manufacturing industries in both domestic and overseas markets. Since the global financial crisis of 2008, steelmaking companies have been facing formidable challenges associated with "overcapacity" or "excess capacity," that is underutilization of their productive c...
Citations
... 5 International organizations also performed impact assessments in general equilibrium, e.g. Caceres, Cerdeiro and Mano (2019), Bekkers and Teh (2019). taris on EU and subsequent European retaliations, nor the specic treatment of the countries that negotiated Voluntary Exports Restraints (VERs) in the US in the Steel and Aluminum case (e.g. ...
Despite the “Phase One Deal” agreed on mid-December 2019, bilateral tariffs between US and China remain at unprecedented high levels, which will have long-lasting effects. US tariffs remain very high on parts, components and other intermediate products; similarly, only the last wave of Chinese retaliatory tariffs has been half cut. We investigate in this paper how such tensions between highly interdependent economies will impact trade, income and jobs. We rely on a set-up featuring General Equilibrium, imperfect competition and importantly differentiating demand of goods according to their use, for final or intermediate consumption. This authorizes tracing the impact of protection along the value chains, on prices, value added and factor
income. Additional tariffs from official lists are taken into account at the tariff line level, before being aggregated within sectors. Beyond the direct toll of sanctions, US exports to the world post a sizeable
decrease as a result of reduced competitiveness led by vertical linkages along the value chains. Because of the tariffs in place as of February 2020, three quarters of the sectors decrease their value added in the US. Consistent with political economy determinants, these twists of value added are transmitted to production factors, leading to sizeable creation and destruction of jobs, and reallocation of capital to the benefit of protected sectors, mostly at the expense of their clients. Ultimately, this paper sheds light on the economic consequences of policies disrupting global value chains.
... Carvalho et al. [55] predicted the welfare losses of 39-43 billion dollars to China and 19-24 billion dollars to the US. Global GDP and trade volume were to be reduced by 1.96% and 17%, respectively, according to Bekkers and Teh [56]. Trade conflict is hurting China more, but supply chain disruption causes the US to lose its GDP [57][58][59], and the US exports to China up to 71% [60]. ...
Various risks and uncertainties are strengthening the downside of the global economy. This paper aims to estimate the impact of the US–China conflict and the World Trade Organization (WTO) Appellate Body’s shutdown on global logistics demand and to show the seriousness of the situation. Existing literature studies on protectionism or the US–China trade conflict were considered, with a focus on the effects of specific issues or impact on bilateral relations. No research has quantitatively considered the adverse effects of the Appellate Body’s shutdown. In this situation, questions can be raised whether the current global shipping logistics system can be sustainable or not. This paper attempts to estimate the shrinking demand for shipping logistics due to global protectionism. Using a dynamic general equilibrium model and trade-cargo-container conversion methodology, which differentiates this paper from previous studies, the paper suggests that the combination of tariffs and NTBs can severely reduce international trade and the demand for maritime logistics services. Depending on the scenario, port cargo is expected to decrease by 3.95 to 6.9 trillion tons, which can be half of the global cargo. Based on these estimates, this paper suggests that a catastrophe could occur in global trade order as well as global maritime logistics. Finally, underlining that the international trade order should not be severely damaged, this paper proposes that countries around the world should seriously discuss this issue at the 12th WTO Trade Ministers’ Meeting in Kazakhstan in June 2020.
... The analysis revealed the potential gain from multilateral trade negotiations as well as results of worldwide trade war. Medium-run macroeconomic, sectoral production effects of a possible global trade conflicts using the WTO Global Trade Model were estimated by Bekkers and Teh [26]. They also considered large swings in sectoral production leading to substantial labour displacement. ...
The development of the renewable energy industry is a priority of economic policies in many countries, since it is viewed as one of the key growth sectors in the economy, playing also a very important role in mitigating climate change. At the international level, renewable energy is an issue of international cooperation but also an area of high trade tensions between countries. The main goal of this paper is to examine the nature and sources of recent trade disputes in the solar photovoltaic sector, which is the most dynamically growing sector in the green energy industry. In particular, the paper explores the links between the contemporary trade disputes and modern protectionism and between protectionist policies and practices and the export competitiveness in the growing sector of the economy. To achieve the aim of the study we explore in detail the WTO trade disputes over photovoltaic (PV) products, which occurred in the years 2007–2018. The products covered by the analysis were solar modules and cells classified under the HS code 854140. In our research we also used measures of descriptive statistics, hierarchical cluster analysis and revealed comparative advantage indexes. Our key results demonstrate the existence of links between protectionist policy causing trade conflicts and the export competitiveness. The research has also allowed us to identify problems of future studies concerning the association between trade protectionism and global value chains in the solar energy sector.
In this paper, we investigate the mechanisms through which import tariffs impact the macroeconomy in two large scale workhorse models used for quantitative policy analysis: a computational general equilibrium (CGE) model (Purdue University GTAP model) and a multi-country dynamic stochastic general equilibrium (DSGE) model (IMF GIMF model). The quantitative effects of an increase in tariffs reflect different mechanisms at work. Like other models in the trade literature, in GTAP higher tariffs generate a loss in terms of output arising from an inefficient reallocation of resources between sectors. In GIMF instead, as in other DSGE models, tariffs act as a disincentive to factor utilization. We show that the two models/channels can be broadly interpreted as capturing the impact of tariffs on different components of a country’s aggregate production function: aggregate productivity (GTAP) and factor supply/utilization (GIMF). We discuss ways to combine the estimates from these two models to provide a more complete assessment of the macro effects of tariffs.
The trade war between the US and China by imposing tariffs has the potential to affect global financial stability. As the largest economy in the world, the US and China had been trading goods and services globally. Then, when these countries have retaliated, the tariff war will affect the global supply chain, international trade, economy, and the stock market. This research examined the effect of the US-China trade war on ASEAN stock prices using an event-study approach. The result shows that the ASEAN stock market has positive abnormal returns during pre-event period (12%). In contrast, ASEAN stock markets shifted to negative abnormal return (-7.4%) in the short-term window, indicating that the stock market is efficient. Stock price reflects the information from the market quickly. However, the impact of the trade war on the ASEAN stock market is insignificant.
The trade war between the US and China by imposing tariffs has the potential to affect global financial stability. As the largest economy in the world, the US and China had been trading goods and services globally. Then, when these countries have retaliated, the tariff war will affect the global supply chain, international trade, economy, and the stock market. This research examined the effect of the US-China trade war on ASEAN stock prices using an event-study approach. The result shows that the ASEAN stock market has positive abnormal returns during pre-event period (12%). In contrast, ASEAN stock markets shifted to negative abnormal return (-7.4%) in the short-term window, indicating that the stock market is efficient. Stock price reflects the information from the market quickly. However, the impact of the trade war on the ASEAN stock market is insignificant.
Recent developments in global trade include actions by major global traders that lie outside the norms of behavior of the World Trade Organization (WTO) over the last 20 years. Member frustrations with the slow pace of negotiations and concerns about strategies and behaviors of other members approaches to trade and economic development have created unprecedented stresses on a system of rules and commitments that have long encouraged global trade growth and increased economic integration. In this paper we explore the value of the multilateral trading system, particularly the WTO, and emphasize that the value goes well beyond crucial achievements such as tariff reductions and the prevention of a global trade war, but is also found in increased certainty and transparency. The WTO reduces uncertainty about trade policy thus promoting trade and investment. Membership of the WTO locks in beneficial reform and has a public good nature also fostering trade with non-members. We discuss the importance of the WTO as a multilateral forum to negotiate rules on segments of trade expected to grow in the future such as services and digital trade. We describe how the history of negotiations in the WTO provides useful insights for negotiations on such future topics.
