The Carbon Border Adjustment Mechanism as a Trade Shifter: GTAP Simulations of China–EU Trade Response

Amid global climate challenges, the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) raises concerns over trade competitiveness and carbon leakage. This study integrates input–output theory and a recursively dynamic GTAP model, utilizing the 2020 Environmental Extended Input–Output Table and GTAP 11 database, to quantify direct and indirect carbon emissions across CBAM‐covered sectors. Innovatively incorporating dynamic updates and multidimensional scenarios (varying CBAM tax rates, Scope 1/2 emissions), we assess CBAM’s impacts on China–EU trade. The analysis reveals that CBAM has a negative impact on Chinese export commodity prices, export volumes, and trade conditions, with a higher tax rate leading to a more significant adverse effect on Chinese export trade. CBAM significantly reduces China’s export prices (−6.56 × 10 −7 % under a $424/ton tax) and volumes (−12.5% decline), while marginally improving EU export prices (up to 1.14 × 10 −5 %) but exacerbating global trade contraction (−50% for non‐EU regions). Sectoral heterogeneity highlights vulnerabilities in energy‐intensive industries. Findings underscore CBAM’s asymmetric trade effects, urging policy coordination to mitigate adverse global impacts.