Category : Featured, Trade War
The newly elected President of the United States has promised to “Make America Great Again”. A major focus of Trump’s policies is limiting low cost competition in the manufacturing sector; a sector which has seen many jobs disappear over the past decade. The most widely cited trade policy proposals involve imposing substantial tariffs on imports from China and Mexico, two of America’s largest trading partners. These policies have been assessed using a computable general equilibrium model designed for the analysis of preferential trade agreements. The results indicate that whilst a 35 percent tariff on Chinese industrial imports would lead to losses in both countries, it would mean gains to alternative suppliers such as Canada, Korea and Taiwan. Imposing a tariff on imports from Mexico seems more promising because it would drive down the price of imports, as Mexico is very dependent on the US market. Our results assume that neither China nor Mexico would retaliate by raising tariffs of their own.