DP14079 Trade Wars: Nobody Expects the Spanish Inquisition
|Author(s):||Eddy Bekkers, Joseph Francois, Doug R Nelson, Hugo Rojas-Romagosa|
|Publication Date:||October 2019|
|Keyword(s):||general equilibrium trade models, International Political Economy, optimal taxation, trade wars|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14079|
This paper assesses the utility of economic theory of rational trade wars to predict such events or to prescribe courses of action to control their consequences. Trade wars are fundamentally political events whose causes are almost completely political and whose consequences are to a significant degree also political. Contemporary economic theory has developed during a uniquely peaceful and liberal period in world history, affecting how economists have thought about trade conflicts, leaving the profession unprepared to provide serious analysis or advice.