Trade Wars and Trade Talks with Data

Ralph Ossa

NBER Working Paper No. 17347
Issued in August 2011, Revised in January 2014
NBER Program(s):Economic Fluctuations and Growth, International Trade and Investment

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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w17347

Published: Ossa, Ralph. 2014. "Trade Wars and Trade Talks with Data." American Economic Review, 104(12): 4104-46. citation courtesy of

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