Trump 2.0 Tariff Policies (Türkiye's Trade Elasticities and Potential Tendencies)

Abstract

This paper examines the potential effects of the new tariff policies announced during the Trump 2.0 era on global trade and their possible consequences for Türkiye. The paper first summarizes the basic framework of discussions about the potential global effects of tariff policies. These discussions suggest that changes in tariff policies specific to Türkiye could impact relations beyond Türkiye-USA. The study analyzes the potential effects of tariff policies on Türkiye based on elasticity estimates. The trend in the elasticities of exports and imports with Türkiye’s main trading partners, the USA, Germany, and China, over time is estimated using the rolling regression method. It is concluded that during the period 1994-2024, the real effective exchange rate effect on Türkiye’s foreign trade was weak, while changes in the income levels of the relevant countries had a more decisive impact. In addition, it is determined that exports of textiles, machinery, metals, and ores, which account for a significant share of exports to the USA, have different dimensions. Possible tariff changes could affect all three commodity groups to varying degrees, as supported by the rolling regression results covering the period 1994-2022. The findings reveal that, although Türkiye will be among the countries with low exposure to Trump 2.0 policies, the indirect effects of tariff changes will be more decisive. Therefore, Türkiye's trade with Germany and China, the nature of its GVCs(Global Value Chains) integration, and its capacity to maintain competitive conditions during this process are highlighted as important determinants.