A Strike on the German Car Industry: A CGE Analysis of Trump's Recent Tariff Hike

Sherif Hassan

No 25-2025, MSR Working Papers from M&S Research Hub institute

Abstract: This paper explores the economic impact of the 25% U.S. tariff on new car imports, with a focus on Germany and the EU. Employing a Computable General Equilibrium (CGE) model built on the GTAP Version 11 framework, the study analyzes the effects on trade flows, sectoral dynamics, and factor markets in the USA, Germany, the EU, and the rest of the world. The simulation results suggest that unilateral trade measures, such as import tariffs on German automobiles, may ultimately be counterproductive. The U.S. fails to achieve substantial welfare or employment gains, as a significant portion of German car imports is used as intermediate inputs in U.S. car manufacturing. The findings underscore the considerable impact on Germany’s automotive exports and the broader European trade landscape, highlighting the far-reaching consequences of protectionist policies on global trade, production, and employment.

Keywords: Tariff; CGE; Macroeconomics (search for similar items in EconPapers)
JEL-codes: B23 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2025-04-29
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Persistent link: https://EconPapers.repec.org/RePEc:ris:msrwps:2025_025

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