Trade Wars and Trade Talks with Data
American Economic Review · 2014 · Volume 104 · Issue 12
Abstract
How large are optimal tariffs? What tariffs would prevail in a worldwide trade war? How costly would a breakdown of international trade policy cooperation be? And what is the scope for future multilateral trade negotiations? I address these and other questions using a unified framework which nests traditional, new trade, and political economy motives for protection. I find that optimal tariffs average 62 percent, world trade war tariffs average 63 percent, the government welfare losses from a breakdown of international trade policy cooperation average 2.9 percent, and the possible government welfare gains from future multilateral trade negotiations average 0.5 percent. (JEL F12, F13, O19)
Keywords
Models of Trade with Imperfect Competition and Scale Economies, Fragmentation, Trade Policy, International Trade Organizations, International Linkages to Development, Role of International Organizations
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