The Return of (Neo-) Protectionism: US Tariffs and Beyond

• The imposition of higher tariffs by President Trump or the threat to do so, while seemingly contradicting economic orthodoxy is not out of sync with the President’s view of the world.

• Tariffs are used as bargaining tool to force US trading partners into bilateral negotiations.

• A so-called “Mar-a-Lago Accord”, in the spirit of the 1985 Plaza Accord, could, in Trump’s view, help in responding to the key challenges of the American economy.

• According to the existing literature, the potential effects of higher US tariffs on the EU are going to be small to medium (0.10%-0.66%).

• Macroeconomic projections by the IMF, which combine the effects of higher tariffs with uncertainty and tighter financial conditions, place the medium-term effect for the EU at 1.75% of GDP.

• The effect of US trade policy uncertainty (TPU) on EU GDP with a two-standard deviation increase of TPU will be up to a drop of EU GDP by 0.73% after three years (the cumulative loss reaching 6.49%).

Read here in pdf the Policy paper by Panagiotis Konstantinou, Assistant Professor, Athens University of Economics and Business; Spyros Blavoukos, Professor, Athens University of Economics and Business; Head of the ‘Ariane Condellis’ European Programme, ELIAMEP and Panagiota Pagoni, Research Assistant, ELIAMEP.