Analysis: Modelling a New Era in Trade: Tariff tensions across three scenarios

The National Board of Trade Sweden has simulated the effects of the new tariffs introduced by the United States and other countries since the end of 2024. The results show that these tariffs have a negative impact on global trade – and that the United States itself is the most affected.

What is this analysis about?

We simulated three different scenarios to analyse how changes in tariff levels affect world trade and the global economy. The main scenario reflects the tariff levels currently in effect, including the trade agreement between the EU and the United States from August 2025 (the Turnberry Agreement). The other two scenarios represent a milder and a more escalated situation with even higher tariffs. We set out to evaluate how these changes affect different countries and sectors, and their impact on GDP, exports and imports.

Is there anything that stands out?

The most striking finding – though not entirely unexpected – is that the United States experiences the greatest trade effects. The country’s GDP falls by around 1–4 per cent in all three scenarios. The industries that the tariffs are meant to protect are among those most negatively affected. This is because many American companies, like most businesses, rely on imported goods. Canada and China are also significantly affected, while Sweden and the EU perform comparatively well.

According to the simulation, what effects will the current EU–US agreement have on Sweden’s foreign trade?

The effects on Sweden are moderate overall. However, some sectors are hit hard – for example, exports of iron and steel to the United States decrease sharply.

The advantage that Sweden and the EU currently have – relatively better access to the US market thanks to the trade agreement – could change. The United States has indicated that it wants to make similar agreements with several other countries. For this reason, we included a scenario where more countries gain comparable access to the US market.

You also simulated a scenario with even higher tariffs. Why?

Trade policy has proven unpredictable, and relations between China and the United States remain tense. At the same time, the United States has made new demands on the EU, which makes their agreement somewhat fragile. Therefore, we simulated a scenario where these negotiated agreements cease, and tariffs between China and the United States, as well as between the EU and the United States, increase further. In this scenario, the negative economic effects intensify, and Sweden’s and the EU’s exports to the United States decline sharply. This simulation also highlights the negative effects of the EU’s countermeasures.

What trade policy conclusions can be drawn from the results?

The analysis shows that tariffs are an ineffective tool for protecting domestic industry. They lead to higher costs, reduced competitiveness and negative effects on employment. To meet these new challenges, it is crucial to strengthen support for the rules-based trading system and increase cooperation between like-minded countries. One possible path forward is to build a coalition of countries that together defend and promote open, rules-based trade. The EU also needs to continue its current approach of signing more free trade agreements. While this cannot fully compensate for reduced access to the US market, it can create new opportunities over time.

The figure shows the percentage change in total trade (exports and imports) for different countries and regions under three scenarios: the main scenario in grey, the deal scenario in blue, and the escalating scenario in green. Across all three, United States´ exports are the most affected, while the overall impact on Sweden and the EU is more modest. China and Canada also see losses. As expected, global trade is less negatively impacted in the deal scenario, especially for the United States, while the escalating scenario leads to a sharper global downturn.

What is the National Board of Trade Sweden?

The National Board of Trade is the Swedish government agency for international trade, the EU internal market and trade policy. Our mission is to facilitate free and open trade with transparent rules as well as free movement in the EU internal market. We provide the Swedish Government with independent analyses, reports and policy recommendations and take into account the views of businesses of all sizes in international trade policy-related matters.