IDEAS home Printed from https://ideas.repec.org/a/bfr/rueban/201872.html
   My bibliography  Save this article

Costs and consequences of a trade war: a structural analysis

Author

Listed:
  • Antoine Berthou
  • Caroline Jardet
  • Daniele Siena
  • Urszula Szczerbowicz

Abstract

Recent US policies (and announcements) and consequent retaliations have increased the threat of a global trade war. This Rue de la Banque provides an assessment of the global macroeconomic short-term implications of higher trade tariffs for the global economy using the International Monetary Fund (IMF) global integrated monetary and fiscal model (GIMF). This quantification takes into account the direct (increase in trade tariffs) and indirect (fall in productivity, rise in financing costs and increase in uncertainty) channels of a global trade war. A global and generalised 10 percentage points (pp) increase in tariffs could reduce the level of global gross domestic product (GDP) by almost 2.0% on impact, and up to 3.0% after two years.

Suggested Citation

  • Antoine Berthou & Caroline Jardet & Daniele Siena & Urszula Szczerbowicz, 2018. "Costs and consequences of a trade war: a structural analysis," Rue de la Banque, Banque de France, issue 72, december.
    • Handle: RePEc:bfr:rueban:2018:72
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/818459_rdb72_en_v5.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Crucini, Mario J. & Kahn, James, 1996. "Tariffs and aggregate economic activity: Lessons from the Great Depression," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 427-467, December.
    2. Dizioli, Allan Gloe & van Roye, Björn, 2018. "Macroeconomic implications of increasing protectionism," Economic Bulletin Boxes, European Central Bank, vol. 6.
    3. Matthieu Bussière & Laurent Ferrara & Juliana Milovich, 2017. "Explaining the recent slump in investment: the role of expected demand and uncertainty," Rue de la Banque, Banque de France, issue 44, may..
    4. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 865-915.
    5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    6. Mr. Derek Anderson & Mr. Benjamin L Hunt & Mika Kortelainen & Mr. Michael Kumhof & Mr. Douglas Laxton & Mr. Dirk V Muir & Susanna Mursula & Stephen Snudden, 2013. "Getting to Know GIMF: The Simulation Properties of the Global Integrated Monetary and Fiscal Model," IMF Working Papers 2013/055, International Monetary Fund.
    7. Sébastien Jean & Philippe Martin & André Sapir, 2018. "International trade under attack- what strategy for Europe?," Policy Contributions 27078, Bruegel.
    8. Melitz, Marc J. & Burstein, Ariel, 2013. "Trade Liberalization and Firm Dynamics," Scholarly Articles 34557509, Harvard University Department of Economics.
    9. Philippe Aghion, Antonin Bergeaud, Matthieu Lequien, Marc J. Melitz, 2018. "The Impact of Exports on Innovation: Theory and Evidence," Working papers 678, Banque de France.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gnangnon, Sèna Kimm, 2020. "Tariff Volatility and Tariff Policy in Developed and Developing Countries," EconStor Preprints 223302, ZBW - Leibniz Information Centre for Economics.
    2. Massimo Ferrari Minesso & Frederik Kurcz & Maria Sole Pagliari, 2022. "Do words hurt more than actions? The impact of trade tensions on financial markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1138-1159, September.
    3. Marlene Amstad & Leonardo Gambacorta & Chao He & Dora Xia, 2021. "Trade sentiment and the stock market: new evidence based on big data textual analysis of Chinese media," BIS Working Papers 917, Bank for International Settlements.
    4. Bekkers, Eddy & Schroeter, Sofia, 2020. "An economic analysis of the US-China trade conflict," WTO Staff Working Papers ERSD-2020-04, World Trade Organization (WTO), Economic Research and Statistics Division.
    5. Eichengreen, Barry, 2020. "Why hasn’t the impact of the trade war been greater?," Journal of Policy Modeling, Elsevier, vol. 42(4), pages 820-828.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ufuk Akcigit & Sina T. Ates & Giammario Impullitti, 2018. "Innovation and Trade Policy in a Globalized World," NBER Working Papers 24543, National Bureau of Economic Research, Inc.
    2. Alessandria, George & Choi, Horag & Ruhl, Kim J., 2021. "Trade adjustment dynamics and the welfare gains from trade," Journal of International Economics, Elsevier, vol. 131(C).
    3. Wolfgang Lechthaler & Mariya Mileva, 2021. "The Dynamic And Distributional Aspects Of Import Tariffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 199-241, February.
    4. Wolfgang Lechthaler & Mariya Mileva, 2019. "Trade liberalization and wage inequality: new insights from a dynamic trade model with heterogeneous firms and comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 407-457, August.
    5. Florin G Maican & Matilda Orth & Mark J Roberts & Van Anh Vuong, 2023. "The Dynamic Impact of Exporting on Firm R&D Investment," Journal of the European Economic Association, European Economic Association, vol. 21(4), pages 1318-1362.
    6. Eichengreen, Barry, 2020. "Why hasn’t the impact of the trade war been greater?," Journal of Policy Modeling, Elsevier, vol. 42(4), pages 820-828.
    7. Wang, Yongjin & Zhao, Laixun, 2015. "Saving good jobs from global competition by rewarding quality and efforts," Journal of International Economics, Elsevier, vol. 96(2), pages 426-434.
    8. Ramanarayanan, Ananth, 2017. "Imported inputs, irreversibility, and international trade dynamics," Journal of International Economics, Elsevier, vol. 104(C), pages 1-18.
    9. Alexandre Janiak & Paulo Santos Monteiro, 2011. "Inflation and Welfare in Long‐Run Equilibrium with Firm Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 795-834, August.
    10. Corsetti, Giancarlo & Martin, Philippe & Pesenti, Paolo, 2007. "Productivity, terms of trade and the `home market effect'," Journal of International Economics, Elsevier, vol. 73(1), pages 99-127, September.
    11. Masashige Hamano & Francesco Pappadà, 2023. "Exchange Rate Policy and Firm Heterogeneity," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(3), pages 759-790, September.
    12. Yuko Imura, 2023. "Reassessing Trade Barriers with Global Production Networks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 77-116, December.
    13. Yi Wen, 2011. "Making sense of China’s astronomical foreign reserves," Working Papers 2011-018, Federal Reserve Bank of St. Louis.
    14. Pesenti, Paolo & Martin, Philippe & Corsetti, Giancarlo, 2005. "Productivity Spillovers, Terms of Trade and the 'Home Market Effect'," CEPR Discussion Papers 4964, C.E.P.R. Discussion Papers.
    15. Larch Mario & Lechthaler Wolfgang, 2011. "Comparative Advantage and Skill-Specific Unemployment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-58, April.
    16. Sourafel Girma & Holger Görg, 2022. "Productivity effects of processing and ordinary export market entry: A time‐varying treatments approach," Review of International Economics, Wiley Blackwell, vol. 30(3), pages 836-853, August.
    17. Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2013. "Unemployment in an Interdependent World," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 262-301, February.
    18. Maemir, H. & Ziesemer, T., 2014. "Multinational production and trade in an endogenous growth model with heterogeneous firms," MERIT Working Papers 2014-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Schmerer, Hans-Jörg & Capuano, Stella & Egger, Hartmut & Koch, Michael, 2015. "Offshoring and Firm Overlap," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113147, Verein für Socialpolitik / German Economic Association.
    20. Liao, Wei & Santacreu, Ana Maria, 2015. "The trade comovement puzzle and the margins of international trade," Journal of International Economics, Elsevier, vol. 96(2), pages 266-288.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:rueban:2018:72. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.