Trump’s China tariffs: Lessons from first principles of classic trade policy welfare analysis (VOX)

Traditional analysis of tariffs in a partial equilibrium setting can tell us much about the welfare consequences of the US-China trade war. The column argues that, as tariffs ratchet up, welfare costs for both sides increase disproportionately. The cost of trade diversion in the US to less-efficient suppliers likely overwhelms any terms-of-trade gain the US might enjoy. In all cases, exporters in the rest of the world benefit.

https://voxeu.org/article/welfare-effects-trumps-china-tariffs

Daniel Gros

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