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The Dynamics of Tariff Retaliation Between the United States and Canada: Theory and Evidence
Author(s) -
Bohara Alok K.,
Gawande Kishore,
Kaempfer William H.
Publication year - 1998
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00085
Subject(s) - tariff , economics , international economics , empirical evidence , macroeconomics , epistemology , philosophy
This paper presents theory and empirical evidence showing a retaliatory pattern in US–Canadian tariff interactions in the period 1868–1970, whereby the changes in the tariff level of each country are Granger‐caused by the other. In the long run, the USA maintains the tariff changes that it initiates while the Canadian policy tends to back away from changes that it initiates. Furthermore, Canadian policy demonstrates a permanent change following US innovations, while in the long run the US tariff returns to its own internal equilibrium unaffected by innovations in the Canadian tariff.