The impact of Trump 2.0 tariff policy on international trade: evidence from Chinese firms

The tariff policies implemented during Trump’s second term have introduced new pressures on the global trade system and heightened uncertainty in the international economic environment. First, we estimate the key parameters of the model using the simulated method of moments based on export data from Chinese firms. Then, we embed the model within a general equilibrium framework. Utilizing the estimated key parameters, we simulate two counterfactual tariff scenarios: a high-tariff scenario calibrated to the Trump 2.0 tariff measures considered in this study and a uniform 5% tariff-reduction scenario. Under Trump’s tariffs: 1. The EU’s export share to the US drops by 65.77%, and China’s by 44.44%. 2. Denmark’s price index rises by 5.62%, while China’s increases by 0.21% and the US’s decreases by 1.2%. 3. Nominal wages increase by 17.00% in Africa and by 3.49% in Asia. Global trade welfare slightly declines. With a 5% tariff reduction: 1. Domestic sales shares fall, with Slovenia’s dropping by 15.27%, China’s by 0.57%, and the US’s by 1.74%. 2. Global trade welfare improves, with Belgium experiencing a 1.81% increase.