8/28/2019 Economic implications of a protectionist US trade policy | VOX, CEPR Policy Portal 1/6 Columns Video Vox VoxTalks Publications Blogs&Reviews People Debates Events About VOX CEPR Policy Portal Research-based policy analysis and commentary from leading economists Search Create account | Login | Subscribe 91 A A Related Awe trumps rules: An update on this year’s G20 protectionism Simon Evenett, Johannes Fritz New eBook: Economics and policy in the Age of Trump Chad Bown Exchange rate implications of border tax adjustment neutrality Willem Buiter Evaluating Trump’s trade policies Gary Hufbauer, Euijin Jung Economic implications of a protectionist US trade policy Gabriel Felbermayr, Marina Steininger, Erdal Yalcin 22 November 2017 The Trump administration intends to restructure US international trade relations with its major trade partners to correct what it perceives to be unfair trade and establish a ‘level playing field’. This column uses a structurally estimated and simulated trade model to analyse three potential protectionist policies that have been discussed by the administration. The results suggest that the promise to create more jobs and investment in the US through such policies is a fallacy. Following the inauguration of Donald Trump, the new US administration initiated a detailed analysis of US trading relations with the rest of the world. Its aim is to identify supposedly increasing “unfair trade practices” by other nations that threaten “well-paid American jobs.” The heated political debate over fair trade focuses on the US’ most important regional trading partners – Mexico and Canada – but large trade balance deficits with major partner countries like China and Germany have also come under fire. In the case of China, the US administration sees subsidies and discrimination against US companies as an unfair trade policy. In the case of Germany, it criticises domestic consumers’ weak appetite for US products. The administration has presented three protectionist trade policy measures as possible strategies for correcting what it perceives to be unfair trade, and for establishing a “level playing field.” Many others have discussed recent US trade policy gyrations (e.g. Nordhaus 2017a, 2017b). There has even been a whole eBook on policy in the ‘Age of Trump’ (Bown 2017) which is partly dedicated to Trumpian trade policy. Our analysis contributes to this research by quantifying the potential outcomes of further US policies for the US and other countries at the sectoral level (Felbermayr 2017). We start by noting that the US actually levies relatively low tariffs compared to its trading partners (Figure 1). 1 Figure 1 Average most-favoured nation tariff by country, 2015 (percent) Challenges in the digital age The parliamentary Brexit endgame Perspectives on the soft power of EU trade policy: A new eBook Gabriel Felbermayr President, Kiel Institute for the World Economy @kielinstitute and Professor, University of Kiel Marina Steininger
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