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The Trade War in Numbers

Author

Listed:
  • Karyne B. Charbonneau
  • Anthony Landry

Abstract

We build upon new developments in the international trade literature to isolate and quantify the long-run economic impacts of tariff changes on the United States and the global economy. In particular, we apply the most recent data and trade elasticity estimates to the Ricardian model of Caliendo and Parro (2015) to quantify the long-run impacts of the recently applied and proposed tariff changes, including the U.S. tariffs on steel and aluminum imports and the rounds of additional tariffs between the United States and China. To fit the reality of the current trade policy shift, our analysis also allows for quotas and endogenizes trade balances. Overall, our results suggest that the newly imposed and proposed tariff schemes imply considerable changes in trade flows and sectoral output reallocations, but modest impacts on long-run aggregate prices and output levels.

Suggested Citation

  • Karyne B. Charbonneau & Anthony Landry, 2018. "The Trade War in Numbers," Staff Working Papers 18-57, Bank of Canada.
  • Handle: RePEc:bca:bocawp:18-57
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    References listed on IDEAS

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    1. Derek Anderson & Benjamin L Hunt & Mika Kortelainen & Michael Kumhof & Douglas Laxton & 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.
    2. Luca David Opromolla & Lorenzo Caliendo & Fernando Parro & Alessandro Sforza, 2017. "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement," Working Papers w201717, Banco de Portugal, Economics and Research Department.
    3. Mary E. Lovely & Jeremie Cohen-Setton & Euijin Jung, 2018. "Vehicular Assault: Proposed Auto Tariffs Will Hit American Car Buyers’ Wallets," Policy Briefs PB18-16, Peterson Institute for International Economics.
    4. Lorenzo Caliendo & Maximiliano Dvorkin & Fernando Parro, 2019. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock," Econometrica, Econometric Society, vol. 87(3), pages 741-835, May.
    5. Raphael Auer & Barthélémy Bonadio & Andrei A Levchenko, 2018. "The economics of revoking NAFTA," BIS Working Papers 739, Bank for International Settlements.
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    Citations

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    Cited by:

    1. Ricardo Reyes-Heroles & Sharon Traiberman & Eva Van Leemput, 2020. "Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(3), pages 456-508, September.
    2. Cecilia Bellora & Lionel Fontagné, 2019. "Shooting Oneself in the Foot? Trade War and Global Value Chains," Working Papers 2019-18, CEPII research center.
    3. Ilaria Fusacchia, 2020. "Evaluating the Impact of the US–China Trade War on Euro Area Economies: A Tale of Global Value Chains," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 441-468, November.
    4. Claudia Bernasconi, 2019. "Comment on "The impact of trade wars on Switzerland: A quantitative assessment" by Laurence Wicht," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 70(01), pages 35-38, December.
    5. Karyne B. Charbonneau, 2019. "The Impact of a Trade War: Assessment of the Current Tariffs and Alternative Scenarios," Staff Analytical Notes 2019-20, Bank of Canada.
    6. Cecilia Bellora & Lionel Fontagné, 2019. "Shooting Oneself in the Foot? Trade War and Global Value Chains," Working Papers 2019-18, CEPII research center.
    7. Sascha Tobias Wengerek, 2020. "Share price reactions to tariff imposition announcements in the Trump era - An event study of the trade conflict," Working Papers Dissertations 59, Paderborn University, Faculty of Business Administration and Economics.
    8. Laurence Wicht, 2019. "The impact of trade tensions on Switzerland: A quantitative assessment," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 70(01), pages 1-34, December.
    9. Fiorentini, Riccardo, 2020. "The Persisting US Trade Deficit: Is Protectionistm the Right Answer?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 155-186.
    10. J.A. Giesecke & R. Waschik & N.H. Tran, 2019. "Modelling the Consequences of the U.S.-China Trade War and Related Trade Frictions for the U.S., Chinese, Australian and Global Economies," Centre of Policy Studies/IMPACT Centre Working Papers g-294, Victoria University, Centre of Policy Studies/IMPACT Centre.
    11. Li, Minghao & Balistreri, Edward J. & Zhang, Wendong, 2020. "The U.S.–China trade war: Tariff data and general equilibrium analysis," Journal of Asian Economics, Elsevier, vol. 69(C).
    12. Simola, Heli, 2019. "Evaluating international impacts of China-specific shocks in an input-output framework," BOFIT Discussion Papers 17/2019, Bank of Finland, Institute for Economies in Transition.

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    More about this item

    Keywords

    Recent economic and financial developments; Trade Integration;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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