Waging a Global Trade War Alone: The Cost of Blanket Tariffs on Friend and Foe
Edward J. Balistreri, Christine McDaniel
October 2024 [24-PB 44]
Suggested citation:
Balistreri, E.J. and C. McDaniel. 2024. "Waging a Global Trade War Alone: The Cost of Blanket Tariffs on Friend and Foe." Policy brief 24-PB 44. Center for Agricultural and Rural Development, Iowa State University.
Executive Summary
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 model’s structure, which includes imperfect competition in increasing-returns industries, is documented in Balistreri, Böhringer, and Rutherford (2024). The basis for the tariff rates is a proposal from former President Donald Trump (see Wolff 2024). 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 US economy over $910 billion at a global efficiency loss of $360 billion. Thus, on net, US trade partners gain $550 billion. Canada is the only other country that loses from a US go-it-alone trade war because of its exceptionally close trade relationship with the United States.