A trade war triggered by President Donald Trump applying a 25 per cent tariff on all imports could cause a $1.4tn hit to the world economy and dramatically drive up US prices, according to a new study modelling the fallout from a retaliatory spiral.
Econometric analysis of a worst-case scenario, where US trade partners hit back against Washington, shows a Trump-inspired tariff war would cause widespread trade disruption, rising prices and falling living standards.
The study by economists at Aston University in the UK examines how a tariff tit-for-tat forces complex shifts in global commerce, starting in North America between the US, Mexico and Canada, before spilling out into Europe and then the rest of world.
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