US trade conflict: Potential economic implications for the US and the global economy

Robert B. Koopman and Marinos Tsigas

Journal of Policy Modeling, 2025, vol. 47, issue 4, 785-804

Abstract: This paper evaluates the economic consequences of increasing US trade unilateralism through a CGE modeling approach focusing on three counterfactual scenarios: universal tariff retaliation, partial US-China de-escalation, and trade barriers combined with immigration restrictions. Using a GTAP framework with enhanced labor market detail, we find that full retaliation reduces US real GDP by 1.32 % and income by 2.77 %, with particularly severe impacts on export-oriented sectors. While selected bilateral accommodation provides modest relief, the combination of trade restrictions and labor deportation policies amplifies losses, reducing GDP by 3.83 % and income by 12.08 %. The results highlight the substantial costs of retreating from cooperative trade frameworks and the interconnections between trade and immigration policies. These findings suggest that preserving rules-based cooperation, enhancing multilateral institutions, and developing integrated labor-trade adjustment mechanisms are vital for maintaining economic resilience in an evolving global order. Keywords: trade policy, tariffs, CGE modeling, labor markets, economic integration

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:4:p:785-804

DOI: 10.1016/j.jpolmod.2025.06.013

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