The US trade dispute: blunt offense or rational strategy?



Michael Hübler and Axel Herdecke | Leibniz University

This article evaluates the recent protectionist US trade policy and the retaliation of the EU and China. The
article employs a New Quantitative Trade Theory model and an Armington model for comparison. The
simulation results show that US car tariffs are a credible threat to the EU, but the steel and aluminum
tariffs are not. China suffers considerably from the US tariffs, especially the extended, tightened tariffs
that have been announced. The retaliation measures of the EU and China, however, do not cause US
welfare losses compared to the situation without such a trade policy.


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