Evaluating the effects of recent geopolitical events on German-Russian trade: a CGE framework approach

This study employs a multi-sector computable general equilibrium (CGE) model to investigate the German-Russian trade relationship, with an emphasis on the effects of sanctions on Russian imports following Ukraine's invasion. The input-output (I-O) table from 2015 is used in the study to quantify the impact of these restrictions and the changes in Germany's production that follow. Various counterfactual scenarios are explored, which includes quota of 67% and 35% on energy and rest of the Russian imports respectively, as well as 30% ad-valorem tariff. The simulation of this quota scenario on the baseline model shows significant reductions in output and domestic use levels. Additionally, the counterfactual analysis of the 30% ad-valorem import tariff on Russian imports indicates a 1.7% overall price increase and a roughly 3.8% decrease in household welfare due to the sanctions.