Project Details
Description
Trade conflicts and tariff wars pose significant threats to the international trade system and globalization. Since 2018, the U.S. has initiated tariff wars against China, which responded with retaliatory measures. Beyond the intensification of U.S.-China trade tensions, other major economies, such as the EU and Japan, have also engaged in trade conflicts to varying degrees. Countries are increasingly imposing unilateral tariffs that they consider optimal, aiming to maximize their own welfare, often at the expense of their trading partners.
While the incentives and consequences of optimal tariffs and resulting tariff wars have been widely studied, existing research has largely overlooked the role of multinational enterprises (MNEs) in shaping these tariffs. This study aims to address this gap by developing a multi-country-multi-sector general equilibrium model that incorporates trade, multinational production (MP), and tariffs. Using comprehensive data on sectoral bilateral trade flows, MP sales, and tariffs across major economies, the study will conduct counterfactual analyses to understand how optimal tariffs are affected by MNEs’ global operations as well as their political influences.
MNEs play a key role in optimal tariffs and tariff wars for three reasons. First, as the largest players in global production and trade, their responses significantly influence the overall impact of tariffs. Second, MNEs wield considerable political influence, and their interests can shape tariff policies. Third, recent tariff wars frequently involve policies affecting international investment and multinational production (MP), making it crucial to understand how trade and MP policies interact in today’s global economy.
This study extends existing trade models on optimal tariffs by incorporating quantitative models of multinational production (MP), based on my previous research, that capture key aspects of MNEs’ global operations in a tractable way. By applying this new model to updated data on trade, MP, and tariffs, the study contributes to the growing body of economic research on the motivations and consequences of optimal tariffs and tariff wars, as well as the interactions between trade and MP policies in shaping international economic competition.
While the incentives and consequences of optimal tariffs and resulting tariff wars have been widely studied, existing research has largely overlooked the role of multinational enterprises (MNEs) in shaping these tariffs. This study aims to address this gap by developing a multi-country-multi-sector general equilibrium model that incorporates trade, multinational production (MP), and tariffs. Using comprehensive data on sectoral bilateral trade flows, MP sales, and tariffs across major economies, the study will conduct counterfactual analyses to understand how optimal tariffs are affected by MNEs’ global operations as well as their political influences.
MNEs play a key role in optimal tariffs and tariff wars for three reasons. First, as the largest players in global production and trade, their responses significantly influence the overall impact of tariffs. Second, MNEs wield considerable political influence, and their interests can shape tariff policies. Third, recent tariff wars frequently involve policies affecting international investment and multinational production (MP), making it crucial to understand how trade and MP policies interact in today’s global economy.
This study extends existing trade models on optimal tariffs by incorporating quantitative models of multinational production (MP), based on my previous research, that capture key aspects of MNEs’ global operations in a tractable way. By applying this new model to updated data on trade, MP, and tariffs, the study contributes to the growing body of economic research on the motivations and consequences of optimal tariffs and tariff wars, as well as the interactions between trade and MP policies in shaping international economic competition.
Status | Not started |
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