Trade Wars – Any Winners?

This is a preview from the National Institute Economic Review, August 2018, no 245.

This Box, prepared by NIESR Principal Economist Iana Liadze, uses NIESR’s Global Econometric Model (NiGEM) to run stylised scenarios to investigate the impact of recent increases in tariffs on US and Chinese imports, continuing earlier work (Liadze and Hacche, 2017; Hantzsche and Liadze, 2018), which shows that tariff imposition not only harms the economies that the tariffs are aimed at, but also the country that imposes them, as well as spilling over to other economies who might be innocent bystanders in the trade dispute.

"In all simulations, higher tariffs lead to an increase in domestic inflationary pressures via an increase in import prices. A tit-for-tat trade dispute leads to an increase in domestic prices of a comparable magnitude in both China and the US, but the impact on inflation in the US becomes more pronounced after the US levy tariffs on a wider range of imports from China."