A classic result in trade theory is that it is socially optimal to set the tariff on a good equal to the inverse of the elasticity of its foreign supply. However, this result is based on the assumption that the government can use lump-sum taxes. The paper considers a simple open representative...

As geopolitical tensions intensify, great powers often turn to trade policy to influence international alignment. We examine the optimal design of tariffs in a world where large countries care not only about economic welfare but also about the political allegiance of smaller states. We consider...

We study the short-run effects of import tariffs on GDP and the trade balance in an open-economy New Keynesian model with intermediate input trade. We find that temporary tariffs cause a recession whenever the import elasticity is below an openness-weighted average of the export elasticity and...