Specific and Ad Valorem Tariffs Are Not Equivalent in Trade Wars

Ben Lockwood and K.Y. Wong

Discussion Papers from University of Exeter, Department of Economics

Abstract: This note argues that when two countries choose optimal tariffs in a trade war, specific tariffs are not equivalent to ad valorem tariffs even if all markets are competitive. In particular, it shows that if a country's trading partener switches a specific tariff to an an valorem tariff that yields the same revenue at the initial trade point, the former country has an incentive to lower its tariffs.

Keywords: TRADE POLICY; INTERNATIONAL TRADE (search for similar items in EconPapers)
JEL-codes: F10 F11 F13 (search for similar items in EconPapers)
Pages: 9 pages
Date: 1996
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Related works:
Journal Article: Specific and ad valorem tariffs are not equivalent in trade wars (2000)
Working Paper: Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:9602

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