The consequences of the Trump trade war for Europe

Using the KITE model suite, we study the economic costs of the Trump tariff policy for Europe, and analyze the potential for trade diversion from China.

• If the current tariff regime stays in place, trade between the U.S. and China would fall dramatically, hurting mainly the U.S. and the Chinese economies. The direct economic impact for Europe appears limited.

• The expected rerouting of Chinese and U.S. exports to third countries is likely to intensify competition between European and Chinese producers in key markets. European consumersstand to benefit from lower prices.