Working Paper: NBER ID: w17347
Authors: Ralph Ossa
Abstract: How large are optimal tariffs? What tariffs would prevail in a worldwide trade war? How costly would be a breakdown of international trade policy cooperation? 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. Optimal tariffs are tariffs which maximize a political economy augmented measure of real income.
Keywords: Tariffs; Trade Policy; Welfare; International Trade
JEL Codes: F11; F12; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| optimal tariffs (F13) | welfare gain for tariff-imposing government (D69) |
| optimal tariffs (F13) | welfare loss for other governments (D69) |
| Nash tariffs (F19) | welfare loss for all countries involved (D69) |
| cooperative tariffs (P13) | government welfare gains (H53) |