World Economy· 2026Q1
Towards a Trade War in 2025: Real Threats for the World Economy, False Promises for the US
- 1citations
- Q1SCImago
- 2026year
Short summary
A 2025 US-initiated trade war, featuring a 60% tariff hike on Chinese imports and 10% on others, would decrease world GDP by 0.5% and world trade by 3.4%, with significant losses for the US and China, and gains for Canada and Mexico.
AI-generated from the title and abstract; the full text is not read.
Key points
- A 2025 US-led trade war scenario projects a 0.5% decrease in world GDP and a 3.4% decrease in world trade volume.
- The US and China are projected to suffer significant economic losses under this scenario.
- Canada and Mexico are projected to gain from this trade war, while other partners benefit from discriminatory tariffs against China.
- US tariff revenues would be insufficient to replace federal income tax.
AI-generated from the title and abstract; the full text is not read.
Abstract
ABSTRACT Using the MIRAGE‐Power computable general equilibrium (CGE) model, we simulate a trade war initiated in 2025 by the new US administration. The central scenario consists in a 60‐percentage point tariff increase on all US imports from China, a 10‐percentage point tariff increase on all products from other partners, except Canada and Mexico, and reciprocal tariff retaliation. World GDP and world trade decrease respectively by 0.5% and 3.4% in volume, with significant losses for the US and China, and gains for Canada and Mexico. A substantial reallocation of bilateral goods trade flows is taking place at the global level. Additional scenarios show that: details of the tariff reform matter; the discriminatory tariff treatment of China benefits other trading partners; trade retaliation increases US economic losses; if Canada and Mexico are included in the trade war, their gains turn into more significant losses than those of other countries. Last, we show that the US will not be able to replace the federal income tax with tariff revenues, even with a revenue‐maximizing tariff.
The authors' abstract, as published at the source. World Economy, 2026 · DOI ↗
Continue with a free account
Ask the paper: 3 free questions a day about this paper; save it, get its citation, new summaries every day for your field. Takeaways are Premium.
Continue free on the webSign in with Google or Apple; no card needed. You come back to this paper.
On your phone:
Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance