Introduction
This article uses the GTAP CGE model to analyze the impact of reciprocal tariffs on the world economy by examining key economic indicators such as real GDP, wages, and the Consumer Price Index (CPI).
While the results are based on a static model and may not fully capture dynamic changes over time, they provide a useful illustration of the potential economic impacts of the policy. If time permits, I will include additional information and interpretation of the results in future updates.
Model
The model used in this simulation is the GTAPv7 standard CGE model. Two simulations have been conducted as follows:
Scenarios
| No. | Scenario | Description |
|---|---|---|
| 1 | US All Tariffs | The U.S. imposes all reciprocal tariffs as proposed on April 2, 2025, on all countries. |
| 2 | US All + Retaliation | Same as Scenario 1, but all countries retaliate against the U.S. with equivalent tariffs. |
Model Assumptions
- All scenarios apply shocks to tariffs (
tms), implemented as increases in percentage points. - Tariff shocks are applied to all sectors excluding services, to specifically analyze the impact on goods.
- The “Rest of World” (ROW) aggregated region includes all countries without a country-specific reciprocal tariff increase. Accordingly, ROW imposes a uniform 10% tariff across all scenarios.
Data
The GTAPv11c Data Base, with a reference year of 2017, is used in this analysis. The data have been aggregated to 55 countries/regions and 36 sectors. The data are extracted and aggregated as shown below:
| Data | Year of Reference | Source |
|---|---|---|
| GTAP Data Base version 11c | 2017 | GTAP 11 Data Base |
| Tariff Shocks | April 2025 | Reciprocal Tariff Measures |
Data Aggregation
Programs
- The model is run using
rungtapthrough the setup of CMF files. - All visualizations and tables were created using Python for data processing and automation, Folium and GeoJSON for interactive mapping, JavaScript for dynamic tooltips and filters, and HTML/CSS for responsive, publication-ready presentation.
Results
The results presented below are shown in three formats:
(1) World map
(2) Bar charts highlighting the 15 most affected countries
(3) Data table including all countries
The results show the percentage change in each corresponding variable under each scenario.
(Brief) Conclusion
It is clear that the most significant impact occurs when all countries fully retaliate against the U.S. However, even without retaliation, the U.S. does not appear to benefit in terms of real GDP under any scenario.
I plan to add more scenarios in a future article, time permitting. In the meantime, I will continue updating this article to provide a more detailed sector-level breakdown for the two existing scenarios.
Acknowledgment
I sincerely appreciate the guidance of Dr. Erwin Corong in setting up the model using GEMPACK and for his valuable advice regarding the GTAP CGE model. I would also like to thank Dr. Maksym Chepeliev for providing me with many great opportunities to work on real-world analyses using the CGE model.
CGE Tools with R Packages
I have developed a few R packages that, while not used directly in this webpage presentation, may be helpful for fellow CGE researchers:
-
HARplus: Officially available on CRAN, this package allows users to easily extract and work with multiple GEMPACK file types, including
.harand.sl4, and export them to various formats. -
GTAPViz: Currently under development but already usable via GitHub installation. This package is designed for presenting GTAP model results, making it easier to compile and visualize CGE outputs through figures and plots for reporting and presentation purposes.
Feel free to check them out—and if you find them useful, please consider giving them a star! If you spot any bugs or have suggestions, I’d love to hear from you!