Globalization

With his so-called “Liberation Day” on April 2, 2025, US President Donald Trump proposed implementing “reciprocal tariffs”, under which the US would raise import tariffs to match those imposed by its trading partners, further undermining the multilateral rules-based system. This policy brief examines the status quo of tariff differentials between the US and the EU and explores the implications of this policy for the German economy should it be implemented.

US President Donald Trump’s 25% tariffs on imports from Canada and Mexico would trigger a sharp decline in exports across all three economies. If retaliatory tariffs are imposed, Canada’s exports could shrink by 28%, Mexico’s by over 35%, and the U.S.’s by 22%, reflecting the deep integration of the countries’ trade flows. Mexico’s and Canada’s manufacturing sectors would suffer the most, with value-added losses of 13% and 14%, respectively. In the U.S., the agricultural sector would take the biggest hit, facing a 2.4% drop in value added. 

This EconPol Report sheds light on the global supply of semiconductors. The analysis of value-added data for the US underscores the importance of semiconductors for advanced economies. Using global trade data and an extensive list of semiconductor-related goods, the authors provide a detailed description of the global semiconductor economy. While final chip exports have been dominated by Taiwan, China, and Korea at an aggregate level since the early 2010s, export leadership varies substantially across chip types. Moreover, the authors identify nine core countries in North America, Europe, and Asia that dominate semiconductor-related trade including material inputs and equipment. The nine countries exhibit substantial mutual trade dependencies due to the fragmentation of semiconductor production

Over the last decades, globalization has led to more integrated markets which fostered the transformation of economies around the world. How do domestic labor markets react to increased competition from abroad? This Policy Brief examines the effect of an import shock on the Mexican labor market focusing particularly on gender differences.

This Policy Report assesses various options for EU climate policy utilizing a quantitative trade and environment model. The authors investigate the EU’s 2030 emission reduction target, evaluate the impact of the newly introduced Carbon Border Adjustment Mechanism (CBAM), and analyze different climate coalitions with the EU at their core, including the recently launched “G7-led Climate Club.” Thereby they assess the impact on both national and global emissions accounting for carbon leakage, on international economic competitiveness and changes in the global market shares of the EU, as well as on aggregate income gains and losses.