trade policy · Julian Hinz

KITE

Julian Hinz — Fri, 09 Oct 2026 00:00:00 +0000

Open the KITE Lab → Shift a tariff and watch the world adjust: live results for 81 economies, computed in your browser.

KITE (Kiel Institute Trade Policy Evaluation) is an open-source framework for quantitative trade-policy counterfactuals. It implements general-equilibrium trade models in the New Quantitative Trade Model tradition and solves them in changes with exact hat algebra: given a baseline and a policy scenario (tariffs, non-tariff measures, carbon taxes), it returns the counterfactual changes in welfare, production, and trade flows.

The model has originally been developed by Caliendo & Parro (2015), building a multi-sector version of the Ricardian trade model of Eaton & Kortum (2002), where countries produce and sell domestically as well as internationally according to their relative comparative advantage. The model extends this framework by allowing for extensive intra- and international input-output linkages where goods and services may enter as both final and intermediate goods. Trade policy is conducted through the tightening or easing of trade barriers in form of tariffs and non-tariff measures.

KITE has been used to evaluate trade agreements (e.g. NAFTA, TTIP), trade disputes (e.g. the US–China trade war) and economic sanctions. It derives the economic consequences for production, value added and welfare based on pre-defined scenarios that specify the policies to be evaluated.

A detailed description of the framework is available in the white paper “The KITE Model Suite: A Quantitative Framework for International Trade Analysis” (with Hendrik Mahlkow and Joschka Wanner, KITE White Paper, Kiel Institute for the World Economy, 2025).

Version 26.10 (“Brisk Fehmarn”, October 2026) ships three models:

Caliendo, Lorenzo, and Fernando Parro. 2015. “Estimates of the Trade and Welfare Effects of NAFTA.” The Review of Economic Studies 82 (1): 1–44.
Sonali Chowdhry, Julian Hinz, Katrin Kamin and Joschka Wanner. 2024. “Brothers in arms: The value of coalitions in sanctions regimes.” Economic Policy 39 (118): 471–512.
Hendrik Mahlkow and Joschka Wanner. 2023. “The Carbon Footprint of Global Trade Imbalances." CESifo Working Paper 10729. Carbon tax in a climate club with border carbon adjustment and export rebates, new in this release.

The full KITE suite comprises 13 models, available on request via kite@kielinstitut.de.

KITE is licensed under GPL-3. Documentation is at kite-model.org/r/.

Install from GitHub via the remotes package:


install.packages("remotes")
remotes::install_github("julianhinz/KITE")

Competing with China in Third Markets

Sonali Chowdhry — Thu, 18 Jun 2026 00:00:00 +0000

China’s export growth is increasingly concentrated in advanced manufacturing sectors, but the loss of European market shares in third markets is not explained by Chinese competition alone. Germany, France, and other European economies have also lost ground to competitors outside China in many markets.

The brief argues against broad tariffs as the default response to Chinese competition. Instead, durable competitiveness requires investment in innovation and new technology. Where sectoral safeguards are considered, they should be justified by strategic or security concerns or clear evidence of unfair trade practices, and temporary protection should include sunset clauses.

A Critical-Inputs Playbook: What the Strait of Hormuz Tells Europe

Julian Hinz — Mon, 15 Jun 2026 00:00:00 +0000

Europe imports only about 4% of its crude oil and 7% of its liquefied natural gas through the Strait of Hormuz. By those measures, the strait’s near-closure since the outbreak of war in February 2026 should barely register in European macro forecasts. Yet the European Central Bank cut its 2026 growth projection by 0.3 percentage points and raised its inflation projection by 0.7 points.

The column traces this discrepancy to a tug-of-war between a bottleneck amplifier and a substitution attenuator: while Europe’s post-2022 energy diversification cushions the direct shock, vulnerabilities persist in critical inputs such as nitrogen fertilizers, jet fuel and petrochemicals, where substitution is slow or nonexistent. What Europe needs is not another energy-crisis playbook but a critical-inputs playbook — serious monitoring and stress testing, strategic reserves for the few inputs that matter most, and a trade and industrial policy that treats chokepoint exposure as a primary parameter.

The Ukraine Support Tariff: How Europe Can Support Ukraine and Weaken Russia

Julian Hinz — Mon, 01 Jun 2026 00:00:00 +0000

A Ukraine Support Tariff on remaining EU–Russia trade would raise revenue for Ukraine while increasing pressure on Russia. The brief studies a combined import tariff and export-side levy on EU–Russia trade and evaluates revenue and welfare effects in partial and general equilibrium.

At moderate tariff rates of 30–50%, the proposal could generate revenue that exceeds annual proceeds from frozen Russian asset interest income. General equilibrium simulations show asymmetric leverage: Russia’s value added falls several times more than the EU’s, while trade diversion to China remains modest. Very high tariff rates would be counterproductive because long-run revenue would collapse.

Der EU-Binnenmarkt als Schutzschild: Wie Europa den Handelskrieg mit den USA abfedert

Gabriel Felbermayr — Mon, 18 May 2026 00:00:00 +0000

Die USA haben 2025 umfassende Importzölle eingeführt, die Europa direkt treffen. Die Analyse zeigt: Der EU-Binnenmarkt wirkt als Schutzschild gegen diese externen Schocks. Die Integration der europäischen Güter- und Arbeitsmärkte halbiert die regionale Streuung der Wohlfahrtseffekte und schützt insbesondere die am stärksten exponierten Regionen.

Der durchschnittliche Wohlfahrtsverlust liegt bei rund 0,06 Prozent, während die Standardabweichung über die Regionen von 0,13 auf 0,06 Prozentpunkte sinkt. Der Binnenmarkt funktioniert damit als Risikoteilungsmechanismus, der regionale Ungleichheiten komprimiert — in Zeiten geoökonomischer Spannungen ist seine Vertiefung eine strategische Notwendigkeit.

America’s Own Goal: Who Pays the Tariffs?

Anna Vorwig — Mon, 19 Jan 2026 00:00:00 +0000

India exports to US: log(unit value)

The 2025 US tariffs are an own goal: American importers and consumers bear nearly the entire cost. Foreign exporters absorb only about 4% of the tariff burden—the remaining 96% is passed through to US buyers. Using shipment-level data covering over 25 million transactions valued at nearly $4 trillion, we find near-complete pass-through of tariffs to US import prices. US customs revenue surged by approximately $200 billion in 2025—a tax paid almost entirely by Americans. Event studies around discrete tariff shocks on Brazil (50%) and India (25–50%) confirm: export prices did not decline. Trade volumes collapsed instead. Indian export customs data validates our findings: when facing US tariffs, Indian exporters maintained their prices and reduced shipments. They did not “eat” the tariff.

The EU–India Trade Deal: Strategic Diversification in an Era of Uncertainty

Julian Hinz — Thu, 01 Jan 2026 00:00:00 +0000

The brief studies an EU–India free trade agreement as a strategic diversification tool in a more uncertain trade environment. Simulations point to mutual welfare gains, substantially higher bilateral trade, and a meaningful reallocation of trade away from China.

For India, the agreement provides a hedge against US tariff pressure. For the EU, it supports de-risking and signals a commitment to open trade. The structural benefits are framed as a long-term partnership rather than a temporary response to current policy shocks.

Tariffs Hit Differently: The Regional Impact of US Tariffs across Europe and the Role of the Single Market

Gabriel Felbermayr — Fri, 12 Dec 2025 00:00:00 +0000

Changes in labor location under U.S. tariff shocks.

We study how recent U.S. tariffs ripple through European regions and how the EU Single Market cushions these shocks. Using a regionalized inter-country input–output framework with labor mobility, we embed 288 European NUTS2 regions in a global production network and quantify the heterogeneous effects of U.S. import protection.

Our counterfactuals compare outcomes under an integrated versus a fragmented Europe. Integration allows firms and workers to substitute along intra-EU value chains, which substantially lowers both average income losses and the dispersion of outcomes across regions. The results highlight how deep integration shapes the geography of trade policy exposure.

Prinzipien für eine europäische Industrie- und Handelspolitik für das geoökonomische Zeitalter

Julian Hinz — Mon, 01 Sep 2025 00:00:00 +0000

An Alliance for Open Trade: How to Counter Trump's Tariffs

Keith Head — Tue, 01 Jul 2025 00:00:00 +0000

The Trump administration’s tariffs hit traditional trading partners including the EU, Canada, Mexico, Brazil, and South Korea. Unilateral retaliation by individual countries is unlikely to be effective against an economy of the size of the United States.

The brief proposes that affected nations instead form a strategic coalition — an alliance for open trade — that implements WTO-compliant counter-tariffs targeting politically sensitive U.S. sectors such as automobiles, pharmaceuticals, and agriculture. Rather than framing the response as punitive, the coalition should position it as a defense of the rules-based international trade order. Prompt coordinated action is essential to prevent further erosion of the global trading system.

Trumps Zölle: Chaotische Entkopplung

Sonali Chowdhry — Tue, 15 Apr 2025 00:00:00 +0000

Die neue Welle US-amerikanischer Handelsbeschränkungen unterscheidet sich grundlegend von den Maßnahmen aus Trumps erster Amtszeit: Die Zölle sind höher, breiter angelegt und enthalten deutlich weniger Ausnahmen. Erwartet wurde eine weitere wirtschaftliche Entfernung der USA von China — die bisherigen Entscheidungen spiegeln jedoch eine weit radikalere und chaotische Abkehr der USA vom Welthandel insgesamt wider.

Für die EU sind die wirtschaftlichen Folgen erheblich: Simulationen zeigen, dass ein anhaltender transatlantischer Zollkrieg die EU-Exporte in die USA langfristig halbieren könnte. Die Last verteilt sich ungleich auf die Mitgliedstaaten — die Slowakei, Litauen und Österreich müssten langfristig mit den stärksten BIP-Rückgängen rechnen.

Diversifizieren, nicht reagieren: Europas neuer Weg in der Handelspolitik

Hendrik Mahlkow — Thu, 10 Apr 2025 00:00:00 +0000

Die neue Zollpolitik der USA konfrontiert die EU mit wachsender handelspolitischer Unsicherheit. Vor diesem Hintergrund analysiert dieser Research Brief drei Szenarien, mit denen die EU auf protektionistische Tendenzen reagieren kann: 1. ein sektorales Handelsabkommen mit den USA, 2. die Vertiefung bestehender Freihandelsabkommen und 3. der Abschluss neuer Freihandelsabkommen mit Partnern wie Indien, Australien oder dem Mercosur. Basierend auf Simulationen mit dem KITE-Modell zeigt sich: Während ein auf die USA beschränktes Abkommen kaum makroökonomische Effekte hat, führen sowohl Szenario 2 als auch Szenario 3 zu einem robusten BIP- und Exportwachstum – insbesondere in wissensintensiven Sektoren. Die stärksten Effekte ergeben sich jedoch aus einer Kombination beider Strategien, wobei der Effekt für Österreich etwas geringer ausfallen würde, da Österreichs Wirtschaftsstruktur stärker auf bestehende EU-Handelspartner und traditionelle Absatzmärkte ausgerichtet ist. Handelsdiversifizierung ist somit kein technisches Detail, sondern ein zentrales Instrument europäischer Resilienzpolitik.

The Consequences of the Trump Trade War for Europe

Julian Hinz — Tue, 01 Apr 2025 00:00:00 +0000

Using the KITE model suite, we study the economic costs of the Trump tariff policy for Europe, and analyze the potential for trade diversion from China. - If the current tariff regime stays in place, trade between the U.S. and China would fall dramatically, hurting mainly the U.S. and the Chinese economies. The direct economic impact for Europe appears limited. - The expected rerouting of Chinese and U.S. exports to third countries is likely to intensify competition between European and Chinese producers in key markets. European consumers stand to benefit from lower prices.

Dealing with Global Economic Challenges: An Agenda for the New Federal Government

Frank Bickenbach — Sat, 01 Feb 2025 00:00:00 +0000

An agenda for the new German federal government on the major global economic challenges. Germany must once again see itself as an important part of and a leading nation within the EU: completing the single market for digital products, financial services, and energy is the precondition for competing with the USA and China. Vis-à-vis China, the EU should reject compromise solutions such as minimum prices for electric vehicles and instead demand a reduction of unfair subsidies and better protection of European companies. Announced US tariffs threaten substantial losses for German exports; Europe should respond with unified countermeasures and higher defense investment. Beyond that, the brief argues for concluding trade agreements with regional partners, a strategic Africa policy built on long-term partnerships rather than migration deterrence, systematic monitoring of critical raw-material supply chains, and swift implementation of the EU emissions trading system.

US Trade Policy after 2024: What Is at Stake for Europe?

Gabriel Felbermayr — Tue, 01 Oct 2024 00:00:00 +0000

Following the upcoming U.S. elections, the EU should prioritize defending the multilateral trade system, as a collapse in global economic cooperation could impact Europe up to four times more than direct U.S. tariffs alone. Potential U.S. trade policies under either a Harris or second Trump administration are expected to remain protectionist, though Harris would likely adopt a more multilateral stance, while Trump could intensify tariffs and weaken the WTO’s role. If the U.S. imposes broad tariffs-such as a 10% surcharge on imports and a 60% tariff on Chinese goods-global trade could shrink by 2.5% initially, with greater contractions if trade partners retaliate.

Time to Be Open, Sustainable, and Assertive: Tariffs on Chinese BEVs and Retaliatory Measures

Gabriel Felbermayr — Mon, 01 Jul 2024 00:00:00 +0000

From 4 July, the EU will impose provisional countervailing tariffs of 21% on battery electric vehicles (BEVs) imported from China. It is the last large market - and in itself largest export market - to impose new substantial trade barriers against Chinese BEVs. According to simulations of a large-scale trade model (KITE model), this measure raises the car prices in the EU and lowers them in China in the long-run. Yet, the effects are small. Short-term effects are likely to be larger. Car imports from China are expected to fall by 42%, but this effect is largely offset by diversion of European sales to domestic markets and higher imports from other third markets. EU car exports are only marginally affected. Value added in the EU’s car industry rises by 0.4%, while it falls by 0.6% in China. In most EU countries, welfare increases, but by less than 1/100th of a percentage point.

The Brussels Effect 2.0: How the EU Sets Global Standards with Its Trade Policy

Elisabeth Christen — Sat, 01 Oct 2022 00:00:00 +0000

The creation of uniform, legally binding norms and standards is an essential basis for the functioning of the EU single market, which at the same time is increasingly spread beyond the EU’s borders through international trade relations. The shaping of global standards and regulations according to EU directives even beyond the EU’s borders represents an important competitive advantage of the EU. The EU also manages to impose rules, regulations and standards only through market mechanisms in third countries without international treaties or agreements. This has in many areas contributed to the “Europeanisation” of important aspects of global trade. In the academic literature, this regulatory influence of the EU is defined as the “Brussels Effect”. The focus of this study is to give a comprehensive overview of the Brussels Effect and to analyse the linkages regarding EU trade policy, outlining to what extent a Brussels Effect can be observed in the network of EU trade agreements. Based on a comprehensive and broad identification of the Brussels Effect, this study aims to quantify the trade effects in terms of the leading role in shaping global standards and regulations for the EU and Austria and to qualitatively identify further areas in which untapped potentials of a “Brussels Effect 2.0” seem possible in the context of EU trade policy.

State Dependence and Unobserved Heterogeneity in the Extensive Margin of Trade

Julian Hinz — Tue, 06 Jul 2021 00:00:00 +0000

Determinants of the Extensive Margin of Trade — Gravity and Persistence.

We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we consider dynamic three-way fixed effects binary choice models and study the corresponding incidental parameter problem. The standard maximum likelihood estimator is consistent under asymptotics where all panel dimensions grow at a constant rate, but it has an asymptotic bias in its limiting distribution, invalidating inference even in situations where the bias appears to be small. Thus, we propose two different bias-corrected estimators. Monte Carlo simulations confirm their desirable statistical properties. We apply these estimators in a reassessment of the most commonly studied determinants of the extensive margin of trade. Both true state dependence and unobserved heterogeneity contribute considerably to trade persistence and taking this persistence into account matters significantly in identifying the effects of trade policies on the extensive margin.

Perspektiven einer erfolgreichen europäischen Handelspolitik im Kontext geopolitischer Herausforderungen

Julian Hinz — Sat, 15 May 2021 00:00:00 +0000

Transpazifische Partnerschaft TPP: Totgeglaubte leben länger

Julian Hinz — Fri, 15 Dec 2017 00:00:00 +0000