World trade war and its macroeconomic consequences

Abstract

In 2018, the Government of the United States of America announced and implemented a number of protectionist measures in various sectors of the economy of other countries, especially in China. Initially, these measures were aimed only at certain goods, but as the conflict between the US and China increased, the list of goods falling under these sanctions also increased. All these factors have led to an even greater aggravation of the trade and economic conflict. The analysis of the current tension between the United States and its trade partners, given in this article, shows that the current foreign economic events can lead to the emergence of a global trade war. In addition to the direct effect caused by the increase in tariffs, a trade war may also have an impact on GDP indirect channels, such as the performance degradation due to uncertainty and changes in the production environment. This article shows that a global tariff increase of 10% can reduce the level of world GDP by almost 2.0% at once, and to 3.0% in two years, when all additional indirect channels materialize.