Protectionism and Retaliation

28 Pages Posted: 2 Mar 2017 Last revised: 17 Aug 2017

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Jingliang Xiao

Infinite-Sum Modeling Inc.; Ciuriak Consulting Inc.

Date Written: January 26, 2017

Abstract

The election of Donald J. Trump as President of the United States raises a litany of questions about the future of US trade policy. Canada, along with Mexico, is particularly heavily exposed to trade with the United States and there is considerable speculation about how Canada should react if the United States moves unilaterally to implement protectionist policies or demands renegotiation of existing trade deals to repatriate off-shored jobs and industry and to redress what the new President has described as “raw deals” for the United States. Amid such high uncertainty, we consider the implications of a historical example of an attempt to address so-called trade imbalances, namely the ‘Nixon measures’ of 1971. In particular, we model a Nixon-measures-type 10 percent surcharge unilaterally imposed by the United States on its trade partners in order to put some numbers around what a protectionist policy might imply for all parties. Secondly, we implement a Canadian surcharge of 10 percent against the United States to see whether Canada is better or worse off by retaliating.

Keywords: protectionism, retaliation, United States, Canada, Nixon Measures, tariff surcharge

JEL Classification: F13, F15

Suggested Citation

Ciuriak, Dan and Xiao, Jingliang, Protectionism and Retaliation (January 26, 2017). Available at SSRN: https://ssrn.com/abstract=2918183 or http://dx.doi.org/10.2139/ssrn.2918183

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

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Jingliang Xiao

Infinite-Sum Modeling Inc. ( email )

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6047245981 (Fax)

HOME PAGE: http://www.infsum.com/en/

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

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