Global political and business leaders are expressing concerns about the possibility of a trade war erupting in the wake of President Trump’s imposition of tariffs on steel and aluminum imports last week. An analysis of the potential cost of such a conflict released Wednesday by the Penn Wharton Budget Model suggests they have good reason to worry.
Penn Wharton looked at the economic consequences of what it called an “all-out trade war” in which all free trade agreements the U.S. currently has are revoked and no goods can enter leave the U.S. without a tariff. While such a scenario has a low probability of occurring, the results are sobering nevertheless: By 2027, wages would be 1.1 percent below the baseline and economic output would be 0.9 percent lower, wiping out the gains most economists expect to see from the tax cuts.
You can read more about the analysis here.