{
  "title": "Trade Partners’ Responses to US Tariffs",
  "publication": "IMF Working Papers, July 18, 2025",
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  "summary": "Recently announced and enacted US tariffs reduce partners’ access to the US market and lead to trade diversion. Impacted countries may respond in (at least) three ways: imposing retaliatory tariffs on the US, resorting to industrial policy to support their producers, and/or signing trade agreements",
  "sections": [
    {
      "heading": "Overview and research question",
      "content": "- Recently announced and enacted US tariffs reduce partners’ access to the US market and lead to trade diversion.\n- Impacted countries may respond in (at least) three ways:\n  - imposing retaliatory tariffs on the US,\n  - resorting to industrial policy (subsidies) to support their producers,\n  - signing trade agreements to find new market access opportunities.\n- The study relies on a quantitative trade model to analyze trade and welfare implications of these policy responses."
    },
    {
      "heading": "Key findings",
      "content": "- Retaliation:\n  - Hurts US exports.\n  - Can improve the retaliating countries’ terms of trade.\n  - Creates distortions in global trade.\n- Subsidies / industrial policy:\n  - Can expand exporters’ market shares, making up for lost markets in the US.\n  - Are costly to implement.\n  - Increase distortions, especially for the subsidizers.\n  - Worsen trade diversion effects and could lead to new tariffs targeting subsidizers.\n- Deeper integration / signing trade agreements:\n  - Helps countries expand trade while reducing distortions.\n  - Even in presence of US tariffs, real income for the liberalizing countries and the world is higher when partners choose to deepen integration as part of their policy strategy."
    },
    {
      "heading": "Policy implications and scenarios analyzed",
      "content": "- Retaliatory tariffs: potential short-term improvement in terms of trade but higher global distortions and adverse effects on US exports.\n- Subsidy-based industrial policy: may protect or expand domestic exporters but carries fiscal costs and raises the risk of escalation and further protectionist measures.\n- Trade liberalization with other partners: a welfare-improving path that mitigates trade diversion and reduces distortions relative to retaliation or subsidy approaches."
    },
    {
      "heading": "Methodology and scope",
      "content": "- Analysis based on a quantitative trade model (details in the Working Paper).\n- Focus on trade and welfare implications across affected partners, the US, and global outcomes."
    },
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      "content": "- Authors: Lorenzo Rotunno, Michele Ruta\n- Date: July 18, 2025\n- Series: IMF Working Papers\n- Working Paper No.: 2025/147\n- Volume: 2025\n- Issue: 147\n- Pages: 42\n- DOI: https://doi.org/10.5089/9798229017008.001\n- Stock No: WPIEA2025147\n- ISBN: 9798229017008\n- ISSN: 1018-5941\n\nSource: \"Trade Partners’ Responses to US Tariffs\", IMF Working Papers, Lorenzo Rotunno and Michele Ruta, July 18, 2025.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/07/18/trade-partners-responses-to-us-tariffs-568632"
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    "Authors: Lorenzo Rotunno, Michele Ruta",
    "Published: July 18, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229017008.001",
    "Recently announced and enacted US tariffs reduce partners’ access to the US market and lead to trade diversion.",
    "Impacted countries may respond in (at least) three ways:",
    "The study relies on a quantitative trade model to analyze trade and welfare implications of these policy responses.",
    "Retaliation:",
    "Subsidies / industrial policy:",
    "Deeper integration / signing trade agreements:",
    "Retaliatory tariffs: potential short-term improvement in terms of trade but higher global distortions and adverse effects on US exports.",
    "Subsidy-based industrial policy: may protect or expand domestic exporters but carries fiscal costs and raises the risk of escalation and further protectionist measures.",
    "Trade liberalization with other partners: a welfare-improving path that mitigates trade diversion and reduces distortions relative to retaliation or subsidy approaches.",
    "Analysis based on a quantitative trade model (details in the Working Paper).",
    "Focus on trade and welfare implications across affected partners, the US, and global outcomes.",
    "Authors: Lorenzo Rotunno, Michele Ruta",
    "Date: July 18, 2025",
    "Series: IMF Working Papers",
    "Working Paper No.: 2025/147",
    "Volume: 2025",
    "Issue: 147",
    "Pages: 42",
    "DOI: https://doi.org/10.5089/9798229017008.001",
    "Stock No: WPIEA2025147",
    "ISBN: 9798229017008",
    "ISSN: 1018-5941",
    "**Working Paper**"
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