Global and regional effects of the US tariffs on iron, steel and aluminium: A SMART combination of models with a focus on Spain

Abstract

On 8 March, US President Donald Trump approved new import tariffs on "iron and steel" and "aluminium" of 25% and 10%, respectively. The aim of this paper is to estimate the impact that this decision might have on the Spanish regions. Our empirical strategy combines three powerful models to address the trade effect both over the global economy, and more specifically, in each Spanish region.First, by means of the SMART simulation model, we estimate the trade effect for 131 countries; then, we compute the intersectoral effects of such shock using the World Input-Output Database (WIOD); finally, we estimate the interregional and intersectoral effects within Spain, using an interregional input-output table. This last step combines both, the immediate product shock over the metal sector in Spain, and the global effect computed by means of the WIOD. The results obtained shows how the US tariffs might induce a total job loss of 185,000 employees worldwide, while in Spain, it may cost 3,500 jobs. KEYWORDS inter-regional input-output models, inter-regional trade, Spain, trade policy, US JEL CLASSIFICATION

American Tariffs and their Impact in the EU and Spain

“…To this regard, we expect to complement our current analysis incorporating a input-output analysis, computed at the international and interregional level, which includes the additional spillover effects caused by the intermediate demand between countries (WIOD tables) and regions within Spain (SIRIO tables). A first article has been published for the case of the metals (Llano et al, 2019), while other two are in preparation, for the other two cases. Furthermore, it will be interesting to incorporate additional macro-economic effects such as the ones linked to the rise in uncertainty and its heterogenous effects by sectors and countries, something that has been recently addressed by several relevant reports (European Central Bank, 2018; 2019).…”

“…It does not consider either the intermediate-demand spillover effects induced in all the other products that use the target products as intermediate inputs for producing other final goods and services. This topic has been addressed in Llano et al (2019;.…”

Macroeconomic Effect of The U.S. Tariff on Steel and Aluminum

“…In March 2018, the U.S. President Donald Trump had formally ordered a new import tariff on steel of 25% aluminum of 10% under Section 232 Trade Expansion Act of 1962 [1]. The tariff, initiated by March 23rd, has several countries and regions exempted including "Canada, Mexico, the EU, as well as other countries such as Argentina, Australia, Brazil and South Korea", which, as believed by some scholars, can possibly be explained by the U.S. consideration on "potential countermeasures" from EU and other region [1]. Nonetheless, on June 1st, the exemptions were recalled "except the ones for South Korea, Argentina, Brazil and Australia", which indeed triggered retaliatory measures from EU and China.…”

“…As is synthesized from different research, the purpose of imposing the tariff is threefold [2]. The first and foremost is to promote national security [1]. The declaration made by the Trump administration insist that a strong steel industry is essential to America's national and economic security.…”

Weaponized trade policy: the impact of US tariffs on the European automobile sector

“…Our approach follows that of Llano et al (2019), which combines three models with great product-country-region coverage. We summarize its three steps.…”