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Shield the US from Imports! – GDP impacts on Finland and other European Union member states

Jyrki Ali-Yrkkö () and Tero Kuusi ()
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Jyrki Ali-Yrkkö: The Research institute of the Finnish Economy (ETLA)
Tero Kuusi: The Research institute of the Finnish Economy (ETLA)

Finnish Economic Papers, 2020, vol. 29, issue 1, 52-80

Abstract: We analyze the value-added impacts of rising U.S. protectionism on Finland and other EU countries using a hypothetical extraction method. Our results show that for many countries, trade to the U.S. represents more than 10% of the value added from exports to all countries. We quantify the value added generated by Finland and other EU countries through Mexico and China to the U.S. For the EU, we find that Mexico has recently been a more important trade route to the U.S. than China has. Furthermore, we analyze the value-added impacts of recent tariff increases and find that their relative impacts are smaller for Finland than for the EU. For both, the direct, static impacts are less than 1% of the GDP, while the dynamic effects may be greater. Our results also suggest that despite highly integrated global value chains, the indirect impact channels of the tariff measures through countries like China are not important enough to affect the Finnish and EU value added by more than 0.1 percentage point of GDP.

JEL-codes: F13 F14 F23 L23 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:fep:journl:v:29:y:2020:i:1:p:52-80