Potential economic effects of a global trade conflict: Projecting the medium-run effects with the WTO global trade model

Arbeitspapier

The WTO Global Trade Model is employed to project the medium-run economic effects of a global trade conflict. The trade conflict scenario is based on recent estimates in the literature of the difference between cooperative and non-cooperative tariffs. The study provides three main insights. First, the projected macroeconomic effects in the medium run are considerable. A global trade conflict started in 2019 would lead to a reduction in global GDP in 2022 of about 1.96% and a reduction in global trade of about 17% compared to the baseline. For context global GDP fell about 2.1% and global trade 12.4% in the global financial crisis of 2009. Second, behind the single-digit aggregate production effects there are much larger, double-digit sectoral production effects in many countries, leading to a painful adjustment process. In general, a global trade conflict leads to a reallocation of resources away from the most efficient allocation based on comparative advantage. Third, the large swings in sectoral production lead to substantial labour displacement. On average 1.15% and 1.74% of high-skilled and low-skilled workers respectively would leave their initial sector of employment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WTO Staff Working Paper ; No. ERSD-2019-04

Classification and Topics

• Classification: Wirtschaft ; Economic Methodology ; Computational Techniques; Simulation Modeling ; Trade Policy; International Trade Organizations ; Trade and Labor Market Interactions ; International Conflicts; Negotiations; Sanctions ; International Agreements and Observance; International Organizations
• Subject: computable general equilibrium (CGE) model ; Nash tariffs ; revealed comparative advantage (RCA) ; labour displacement

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bekkers, Eddy ; Teh, Robert
• Event: Veröffentlichung
• (who): World Trade Organization (WTO)
• (where): Geneva
• (when): 2019

Further information

• DOI: doi:10.30875/7dc4c62e-en
• Handle: http://hdl.handle.net/10419/195777
• Last update: 10.03.2025, 11:44 AM CET