A World Trading System For Whom? Evidence from Global Tariffs

Rodrigo Adao, John Becko, Arnaud Costinot and Dave Donaldson

No 20987, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use global tariffs to reveal the weights that nations implicitly place on the welfare of their trading partners relative to their own. Our estimated welfare weights suggest that formal and informal rules of the world trading system make countries internalize the impact of their policies onto others to a substantial extent, though not fully. On average, countries place 25% less value on transfers to foreigners than transfers to their own residents. Across nations, we find that countries that put higher welfare weights on the welfare of foreigners also tend to receive higher weights from them, consistent with a general form of reciprocity among nations. Using our estimated welfare weights, we provide a first look at what countries stand to lose, or gain, from the dissolution of the world trading system as we know it.

Keywords: Reciprocity (search for similar items in EconPapers)
JEL-codes: F10 F14 F50 (search for similar items in EconPapers)
Date: 2026-01
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