Trade Wars: Are Good and Easy to Win?

8 Pages Posted: 23 Aug 2018

See all articles by Karen Jackson

Karen Jackson

University of Westminster

Oleksandr Shepotylo

Aston University - Aston Business School

Date Written: August 13, 2018

Abstract

This paper explores the welfare implications of the current US protectionist non-cooperative trade policy and potential responses by the EU and China. Using a structural gravity approach, we evaluate three retaliatory scenarios. Our estimates suggest that the impact of this trade war on the US is negative in all policy scenarios, ranging from 0.25 to 1.4 percent of GDP, with the lower range of welfare losses when the EU or/and China do not retaliate. Therefore, it is a dominant strategy for both China and the EU to keep tariffs against US goods at current levels.

Keywords: Gravity Model, Trade War, US

JEL Classification: F13, F14

Suggested Citation

Jackson, Karen and Shepotylo, Oleksandr, Trade Wars: Are Good and Easy to Win? (August 13, 2018). Available at SSRN: https://ssrn.com/abstract=3230668 or http://dx.doi.org/10.2139/ssrn.3230668

Karen Jackson (Contact Author)

University of Westminster ( email )

35 Marylebone Road
London NW1 5LS
United Kingdom

HOME PAGE: http://karen-jackson.com

Oleksandr Shepotylo

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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