Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251202 
Year of Publication: 
2022
Series/Report no.: 
Kiel Working Paper No. 2210
Publisher: 
Kiel Institute for the World Economy (IfW Kiel), Kiel
Abstract: 
With ever-increasing political tensions between China and Russia on one side and the EU and the US on the other, it only seems a matter of time until protectionist policies cause a decoupling of global value chains. This paper uses a computable general equilibrium trade model calibrated with the latest version of the GTAP database to simulate the effect of doubling non-tariff barriers - both unilateral and reciprocal - between the two blocks on trade and welfare. Imposing trade barriers almost completely eliminates bilateral imports. In addition, changes in price levels lead to higher imports and lower exports of the imposing country group from and to the rest of the world. The targeted country group increases exports to the rest of the world and reduces imports. Welfare falls in all countries involved, suggesting that governments should strive to cooperate rather than turning away from each other. By imposing a trade war on Russia, the political West could inflict severe damage on the Russian economy because of the latter's smaller relative size.
Subjects: 
Trade
non-tariff barriers
global value chains
quantitative trade model
China
Russia
European Union
JEL: 
F11
F13
F14
F17
Document Type: 
Working Paper

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