The United States would have most to lose if it started a trade war with other countries, while China would be better off after retaliating, a simulation by the European Central Bank showed on Wednesday.
US president Donald Trump said trade wars were ‘good, and easy to win’ in March as he started a dispute with China that has seen its administration impose tariffs on steel, aluminium and various Chinese products.
The ECB study simulates a 10 per cent US tariff on all imports and an equivalent retaliation from other countries. It suggests the United States would bear the brunt of diminished trade and of damage to consumer and investor confidence.
‘Estimation results suggest that the United States’ net export position would deteriorate substantially,’ the ECB said in the study. ‘In this model, US firms also invest less and hire fewer workers, which amplifies the negative effect.’
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