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What if Trump is re-elected? Trade policy implications

Author

Listed:
  • Obst, Thomas
  • Matthes, Jürgen
  • Sultan, Samina

Abstract

A possible re-election of Donald Trump as US president in November 2024 could entail a significant upheaval for the world trading order, if he fulfills his announcements to raise tariffs, mainly in order to reduce the US trade deficit. Such steps would not only have a negative effect on the world economy - and this at a time of significant global strains. They would also deal a further blow to the WTO, as the envisaged tariff increases would clearly violate international trade rules. Transatlantic relations with the EU are also likely to suffer. First, old trade disputes that were largely settled with the Biden administration could flare up again, e.g. regarding steel and aluminum. Second, Trump could abolish co-operative measures by the Biden administration that mitigate the protectionist elements of the US Inflation Reduction Act for EU exporters. Third, the future of the EU-US Trade and Technology Council (TTC) might be jeopardised. This report simulates the impact of two scenarios. Scenario 1 entails an increase of US tariffs to 10 per cent on all US imports and to 60 per cent on US imports from China in 2025. These threats have been publicly envisaged by Donald Trump and his former trade advisers. In scenario 2, in reaction to scenario 1, China would retaliate with a tariff increase of 40 percentage points on imports from the US.

Suggested Citation

  • Obst, Thomas & Matthes, Jürgen & Sultan, Samina, 2024. "What if Trump is re-elected? Trade policy implications," IW-Reports 14/2024, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
  • Handle: RePEc:zbw:iwkrep:285358
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    More about this item

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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