EconPol Policy Briefs

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. 

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.

The European Union faces several simultaneous threats to its competitiveness: weakness in the industries of the future, insufficient innovation, expensive energy, the need to green its economy, and geopolitical and trade shifts, to name but a few. The EconPol Europe Annual Conference, on whose proceedings this policy brief is based, focused on three aspects that could make a substantial contribution to securing prosperity in the EU, but are in a lamentable state: they all currently fall far short of their potential. These are the power of the single market, the level of its innovation, and the capacity to defend itself. Both the high-level speakers at the conference as well as EconPol and ifo research make clear that some low-hanging fruit are there for the taking, if only the political will were there, a good dose of national chauvinism could be overcome, and an effective communication campaign were undertaken to explain to voters why some measures are not only necessary, but unavoidable. 

The idea of a Banking Union emerged in the aftermath of the global financial crisis. Ten years on, two of its three pillars, the Single Supervisory Mechanism and the Single Resolution Mechanism, have proven to be a success with regard to financial integration and stability. In this Policy Brief, experts from the Deutsche Bundesbank explain why, in times of structural change, it is crucial to complete the Banking Union and advance the Capital Markets Union.