The Impact of a Trade War: Assessment of the Current Tariffs and Alternative Scenarios

Karyne Charbonneau

No 2019-20, Staff Analytical Notes from Bank of Canada

Abstract: This note uses Charbonneau and Landry’s (2018) framework to assess the direct impact of the current trade tensions on the Canadian and global economies, as well as possible implications if the conflict escalates further. Overall, my findings show that the estimated impact of current tariffs on real gross domestic product (GDP) remains relatively small, which is in line with the literature on gains from trade, but the impact on trade is much larger. With a modest escalation of trade tensions, monetary policy in Canada could face a situation of rising prices and falling real GDP. This dilemma would be worse if Canada takes an active role in the trade conflict. If trade tensions rise more dramatically, the effect on Canada would depend on Canada’s access to the US market. A significant and more broad-based rise in tariffs could lead to large global impacts.

Keywords: Recent economic and financial developments; Trade Integration (search for similar items in EconPapers)
JEL-codes: F11 F13 F14 F15 F50 F62 F68 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2019-07
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.bankofcanada.ca/2019/07/staff-analytical-note-2019-20/ Abstract (text/html)
https://www.bankofcanada.ca/wp-content/uploads/2019/07/san2019-20.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsan:19-20

Access Statistics for this paper

More papers in Staff Analytical Notes from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().