The Trade War in Numbers

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...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Charbonneau, Karyne B, Landry, Anthony
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2018
Subjects
Economic models
Tariffs
Trade disputes
United States > US
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Summary: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.