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Impacts on Global Trade and Income of Current Trade Disputes (English)

Global trade tensions have worsened and developing countries stand to see depressing investments as global uncertainty grows. On July 6, the United States implemented a first round of tariffs on 34 billion dollars of imports from China, as part of 50 billion dollars in announced tariffs; China retaliated with tariffs on an equivalent amount of imports from the United States. Both countries have announced the potential for additional tariffs. The new tariffs will depress bilateral trade, disrupt global supply chains, and increase demand for substitutes from other countries. Because both countries are large, there will also be terms of trade effects. The biggest effects of tariff escalation on developing countries are likely to come from depressed investment, as firms delay investments because of uncertainty over market access. This note assesses the implications of tariffs between China and the United States on developing countries, using a Computable General Equilibrium (CGE) Model, under three scenarios. The analysis shows that a US-China tariff escalation could reduce global exports by up to 3 percent (674 billion dollars) and global income by up to 1.7 percent (1.4 trillion dollars) with losses across regions.

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Citation

Freund,Caroline Ferrantino,Michael Joseph Maliszewska,Maryla Ruta,Michele

Impacts on Global Trade and Income of Current Trade Disputes (English). MTI Practice Note,no. 2 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/685941532023153019/Impacts-on-Global-Trade-and-Income-of-Current-Trade-Disputes