Modelling regional exposure to new trade wars

Abstract

The COVID-19 pandemic and recent geopolitical events have triggered a new wave of protectionism. The return of Trump to the White House, a new trade war has just started. With the aim of addressing the territorial effect of trade policy , this study quantifies the effects of two significant protectionism measures announced by the US against the EU before the pandemic: the Boeing-Airbus trade dispute within the WTO and a 25 % tariff on the automotive sector. The impacts are calculated for 297 NUTS-2 European regions combining partial equilibrium and multiregional input-output analysis. The results reveal that the new tariffs would significantly negatively impact the European economy, with unevenly distributed effects across regions. The most affected regions are those heavily specialized in targeted products, such as automotive and aerospace components, and those deeply integrated into European value chains, experiencing substantial indirect impacts. This work underscores the need for targeted policy interventions at the European, national, and regional levels to mitigate these adverse effects. Key policy recommendations include developing contingency plans, promoting sectoral and geographical diversification, and strengthening intra-European trade relations. The findings highlight the strategic importance of the EU’s engagement in global trade negotiations to protect its economic interests and support vulnerable regions. This study wants also to illustrate the potential effects of some of the new tariffs just announced by Trump against the EU to be applied in the first years of his second term.

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