Potential economic effects of a global trade conflict: Projecting the medium-run effects with the WTO global trade model
Eddy Bekkers () and
No ERSD-2019-04, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division
The WTO Global Trade Model is employed to project the medium-run economic effects of a global trade conflict. The trade conflict scenario is based on recent estimates in the literature of the difference between cooperative and non-cooperative tariffs. The study provides three main insights. First, the projected macroeconomic effects in the medium run are considerable. A global trade conflict started in 2019 would lead to a reduction in global GDP in 2022 of about 1.96% and a reduction in global trade of about 17% compared to the baseline. For context global GDP fell about 2.1% and global trade 12.4% in the global financial crisis of 2009. Second, behind the single-digit aggregate production effects there are much larger, double-digit sectoral production effects in many countries, leading to a painful adjustment process. In general, a global trade conflict leads to a reallocation of resources away from the most efficient allocation based on comparative advantage. Third, the large swings in sectoral production lead to substantial labour displacement. On average 1.15% and 1.74% of high-skilled and low-skilled workers respectively would leave their initial sector of employment.
Keywords: computable general equilibrium (CGE) model; Nash tariffs; revealed comparative advantage (RCA); labour displacement (search for similar items in EconPapers)
JEL-codes: B41 C63 F13 F16 F51 F53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:wtowps:ersd201904
Access Statistics for this paper
More papers in WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().