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EUROPEAN FISCAL RULES AS A LIABILITY IN THE TRANSATLANTIC TRADE CONFLICT: LESSONS FROM NiGEM SIMULATIONS

Published online by Cambridge University Press:  03 November 2020

Sebastian Dullien ,
Sabine Stephan  and
Thomas Theobald
Sebastian Dullien
Affiliation:
Hans Böckler Foundation. E-mails: [email protected], [email protected], and [email protected].
Sabine Stephan
Affiliation:
Hans Böckler Foundation. E-mails: [email protected], [email protected], and [email protected].
Thomas Theobald
Affiliation:
Hans Böckler Foundation. E-mails: [email protected], [email protected], and [email protected].
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Abstract

Under the Trump administration, a transatlantic trade conflict has been escalating step by step. First, it was about tariffs on steel and aluminium, then about retaliation for the French digital tax, which is suspended until the end of the year. Most recently, the US administration threatened the European Union with tariffs on cars and car parts because of Canadian seafood being subject to lower import duties. As simulations with NiGEM show, a further escalation of the transatlantic trade conflict has the potential to slow down economic growth significantly in the countries involved. This is a considerable risk given the fact that the countries have to cope with the enormous negative effects of the pandemic shock. Furthermore, the damage caused by the trade conflict depends on the extent to which the affected countries use fiscal policy to stabilise their economies.

Keywords

trade wareconomic growthuncertaintyfiscal policyE17F17
Type
Research Article
Information
National Institute Economic Review , Volume 254 , November 2020 , pp. R54 - R66
Copyright
© National Institute of Economic and Social Research, 2020

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Footnotes

We thank Ian Hurst, Corrado Macchiarelli and an anonymous referee for valuable comments and suggestions.

References

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