Transatlantic Cooperation Instead of a Tariff War

The study analyses the potential economic impact of trade policy developments between the European Union (EU) and the United States (USA) in the context of increasing geopolitical uncertainty and protectionist tendencies. A variety of possible scenarios are examined using the KITE model, with a particular focus on the short- and long-term effects on the EU economies, especially on Germany, of a transatlantic trade war, increased trade policy uncertainty, and a comprehensive trade agreement. The results suggest that a trade war between the EU and the USA would result in substantial economic losses for both parties, with the EU experiencing a more severe impact due to its greater reliance on exports. Conversely, a comprehensive trade agreement could generate significant economic benefits, particularly for Germany's export-oriented economy. A particular strength of the study lies in its detailed analysis of regional effects within Germany. It shows that the effects of a trade conflict or deal can vary greatly between regions. The study emphasises that a robust trade agreement could generate economic benefits and contribute to stabilising the rules-based multilateral trading system. It also highlights the need for the EU to adopt a proactive and strategic approach.