We consider an upstream firm dealing with a downstream firm either via a two-part tariff or a linear tariff. The downstream firm faces demand uncertainty, it is risk-averse, and it must incur a fixed cost before demand realization. We show that when the fixed cost is relatively high, it is...

We study how the most-favored-nation (MFN) clause affects the tariffs of an importer, technology adoption by exporters, and global welfare. Our main contribution is to consider the disclosure effect of the MFN clause, that is, the fact that it makes tariffs not only uniform but also observable...

Europe has set itself the aim of reducing its dependency on Russian gas imports. This paper provides an economic analysis of a tariff on imports of natural gas into the EU which would help achieve this goal. The starting point is Gazprom’s monopoly on exports of gas from Russia and pricing...

We study how the most-favored-nation (MFN) clause affects the tariffs of an importer, the technology choices of exporters, and global welfare. Our key contribution is to consider that the MFN clause does not only impose nondiscriminatory tariffs but also makes tariffs observable to third...

We examine the superiority of the uniform versus discriminatory tariffs in global welfare by taking into account the asymmetric increasing marginal costs between exporters and endogenous delegation problem. First, depending on the degree of product differentiation under Bertrand competition,...

This research is interested to observe from a multi-dimensional perspective the consumption effects (domestic consumption), production effects (domestic production), trade effects (imports), and revenue (government) under different tariffs simultaneously. We introduce a new model is entitled...

We derive a new formula for the optimal uniform tariff in a small-country, heterogeneous-firm model with roundabout production and a nontraded good. Tariffs are applied on imported intermediate inputs. First-best policy requires that markups on domestic intermediate inputs are offset by...

The aim of this study is to examine the role that tariffs could possibly play beyond an infant industry argument, by considering three scenarios on how a technological competition can evolve, an approach that is built on the principle of fairness. At Davos, World Economic Forum (2019)...

The theoretical debate over whether countries can and should set tariffs in response to the foreign export elasticities they face goes back to Edgeworth (1894). Despite the centrality of the optimal tariff argument in trade policy, there exists no evidence about whether countries actually...

This paper analyzes the determination of the optimal tariff under the assumption of Consistent Conjectural Variations (CCV). A general characterization of the CCV equilibrium is given. We show that (i) there are, in general, a multiplicity of such equilibria, and (ii) under certain restrictions,...

We examine the incentives for a government to levy an optimal tariff on a foreign monopolist. With complete information, the home government uses tariffs to extract rents and therefore implements a policy of discriminatory tariffs entailing higher tariffs on more efficient firms. By contrast if...

We present a new tariff-game rule and a new numéraire rule in Krugman's celebrated model to form symmetric trading blocs. We hold that to maintain logical consistency in a world of symmetric trading blocs, an individual bloc should act on the actions of other individual external blocs in a...

We derive a new formula for the optimal uniform tariff in a small-country, heterogeneous-firm model with roundabout production and a nontraded good. Tariffs are applied on imported intermediate inputs. First-best policy requires that markups on domestic intermediate inputs are offset by...

We combine a model of combined inter-spatial and inter-temporal trade between countries - recently used by Huang, Whalley and Zhang (2004) to analyze the merits of trade liberalization in services when goods trade is restricted - with a model of foreign exchange rationing due to Clarete and...

We study the procompetitive effects of trade policies against a foreign oligopoly in a model of vertical product differentiation. We show that a uniform tariff policy like the Most Favored Nation (MFN) clause is always welfare superior to free trade because of a pure rent-extraction effect....

We present a unified treatment of optimal trade policy for a small country. The well-known results for duopoly and competitive markets emerge as benchmark cases of our model. In addition, we show that changes in market structure have non-monotonic effects on optimal tariffs. Our results suggest...

Since 2018, the U.S. and the EU have been erecting additional tariff barriers against each other. This study takes stock of existing transatlantic retaliatory tariffs and examines three different motives that explain how products are chosen to qualify for tariff retaliation. These channels are:...

This paper analyzes interdependencies between optimal trade policy and ‘preferred' liability doctrine to assess infringement damages, when intellectual property rights are probabilistic, in a model of import competition between a foreign patentee and a domestic infringer. It shows two reversal...

We derive a small open economy (SOE) as the limit of an economy as the number or size of its trading partners goes to infinity and trade costs also go to infinity. We obtain this limit in the Armington, Eaton-Kortum, Krugman, and Melitz models. In all cases, the trade of the SOE with the foreign...

We develop a dynamic extension of Dornbusch et al. (1977) with "rustiness": the home country has relatively higher unit costs tomorrow for goods it is not producing today. We solve for optimal tariff policy when there is a potential for a crisis: an increase in demand for goods produced abroad....

With his announcement to pull the US out of the Paris Agreement US President Donald Trump has snubbed the international climate policy community. Key remaining parties to the Agreement such as Europe and China might call for carbon tariffs on US imports as sanctioning instrument to coerce US...

With his announcement to pull the US out of the Paris Agreement US President Donald Trump has snubbed the international climate policy community. Key remaining parties to the Agreement such as Europe and China might call for carbon tariffs on US imports as sanctioning instrument to coerce US...

We use a dynamic trade model with two sectors and two types of workers to analyze the optimal setting of income-generating tariffs. This approach allows us to take account of adjustment dynamics, distributional aspects and the time horizon of policy makers and workers. In response to a...

This paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector. In a model of strategic trade policy, the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous, depending on the weight placed by the...

What tariffs would countries impose if they did not have to fear any retaliation? What would occur if there was a complete breakdown of trade policy cooperation? What would be the outcome if countries engaged in fully efficient trade negotiations? And what would happen to trade policy...