A trade war will increase average tariffs by 32 percentage points

a column by Alessandro Nicita, Marcelo Olarreaga and Peri da Silva For Vox: CEPR’s Policy Portal

There are growing signs that a trade war is possible, and that the multilateral trading system may not be able to prevent it.

This column asks what would happen with tariffs around the world if countries were to move from cooperative tariff setting within the WTO to non-cooperative tariff setting outside the WTO. It argues that that the resulting trade war with countries exploiting their market power would lead to a 32-percentage point increase in the tariff protection faced by the average world exporter.

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Nobody wins in a trade war. I really hope that it can be avoided.

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