The international transmission effects of tariff increases in an economy characterized by recent global goods market trends

Kohjiro Dohwa ()
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Kohjiro Dohwa: Faculty of Economics, Setsunan University

No 2523, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: By constructing a two-country model with LCP, vertical trade, and endogenous entry of three types of final goods firms, we examine the effects of a rise in tariffs on imported final goods. In particular, we analyze both PCP and LCP scenarios and then focus on the role of LCP. In the full PCP scenario, we show that higher tariffs improve home welfare and undermine foreign welfare. On the other hand, in the full LCP scenario, we show that tariff increases undermine welfare in both countries, albeit only slightly.

Pages: 51 pages
Date: 2025-12
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