KITE

KITE (Kiel Institute Trade Policy Evaluation) is a large-scale, multi-country general equilibrium trade model rooted in the new quantitative trade theory tradition (Eaton & Kortum, 2002) and subsequently extended to a multi-sector, input-output framework. It provides a versatile platform for analysing complex trade and policy scenarios within a globally consistent and empirically grounded framework. KITE represents global trade across more than 150 countries and 65 sectors, capturing detailed inter-sectoral linkages as well as realistic trade cost structures that influence international trade. KITE is regularly updated and has been applied to various tariff shock scenarios, carbon border adjustment mechanisms and trade fragmentation scenarios.

The KITE model simulates how countries and sectors respond to a variety of trade policy shocks, including tariffs, trade agreements, or economic sanctions. It accounts for differences in technological capabilities across countries and traces how goods move along international supply chains. KITE assumes that both consumers and companies source goods from the lowest-cost supplier worldwide, taking into consideration trade barriers such as tariffs, transport costs, and other trade frictions. This framework effectively captures the dynamics of international competition and allows the model to track resulting changes in prices, production, trade flows, and national incomes worldwide.

A distinctive feature of KITE is its incorporation of linkages between sectors: goods are not only consumed by households but are also used as inputs in the production of other goods. This feature makes the model particularly suitable for evaluating ripple effects throughout global value chains. Households allocate their expenditure across sectors in a consistent manner, while trade flows adjust in response to changes in relative costs and competitiveness across countries and sectors.

KITE is regularly updated to reflect the most recent state of the world, with the baseline for simulations calibrated to January 2025. It incorporates the latest available data on trade flows, tariff schedules, and macroeconomic conditions. This dynamic baseline ensures that simulations are grounded in current realities and can be used for timely policy advice.

KITE has been applied to a wide range of pressing policy questions, including:

• EU strategies to respond to escalating US tariffs under a second presidency of Donald Trump,
• trade liberalisation scenarios with Japan, South Korea, Canada, and other "Single Market+" partners,
• effects of the EU Carbon Border Adjustment Mechanisms (CBAM),
• regional effects of trade fragmentation within the EU using NUTS-2 level data,
• burden-sharing arrangements in international sanctions coalitions.

KITE is continuously refined and maintained by researchers at the Kiel Institute for the World Economy in close collaboration with Austrian Institute of Economic Research (WIFO) and is embedded in the FIW research platform.