We use an advanced model of the global economy to consider a set of scenarios consistent with the proposal to impose a minimum 60% tariff against Chinese imports and blanket minimum 10% tariff against all other U.S. imports. The model’s structure includes imperfect competition in increasing-returns industries. The basis for the tariff rates is a proposal from former President Donald Trump. We consider these scenarios with and without symmetric retaliation by our trade partners. Our central finding is that a global trade war between the United States and the rest of the world at these tariff rates would cost the U.S. economy over $910 billion at a global efficiency loss of $360 billion. Thus, on net, U.S. trade partners gain $550 billion. Canada is the only other country that loses from a U.S. go-it-alone trade war because of its exceptionally close trade relationship with the United States.

 

We use an advanced model of the global economy to consider a set of scenarios consistent with the proposal to impose a minimum 60% tariff against Chinese imports and blanket minimum 10% tariff against all other US imports. The basis for the tariff rates is a proposal from former President Elect Donald Trump. Our central finding is that a global trade war between the United States and the rest of the world at these tariff rates would cost the US economy over $910 billion.