Impact of Tariff War on World Economy Especially After WTO: A Time Series Econometric Enquiry

Abstract

The open objective of liberalization or globalization for the developed nations is the expansion of market or the creation of opportunities to produce and sale more and more goods and/or services beyond the domestic market which ultimately lead the nation in the right path of development. On the other hand, this economic environment is a challenge for the developing or less developed or small nations with respect to share of world trade to compete with the developed or large nations with respect to the quality of the product, technology, skill of human resources, etc. There arise tariff impositions to protect the domestic economies to defend against the challenges. Under these circumstances, this chapter tries to investigate the impact of such tariff war measured by trade as a percentage of GDP on the per capita GDP of the nations. It finds that all the variables are cointegrated. The effect depends on how we measure world tariff, for example, the effect of tariff on trade is positive and significant when we measure the world tariff as simple mean of all products but the effect of tariff on trade is negative and statistically significant when we take tariff as weighted mean of all products. Similarly, the effect of tariff on per capita income is positive if tariff is measured with simple average of all products but this effect is negative and significant when it is measured with weighted mean of all products. In this case, imposition of world tariff (weighted mean of all products) declines world per capita income especially in short run.

Citation

Datta, K. (2021), "Impact of Tariff War on World Economy Especially After WTO: A Time Series Econometric Enquiry", Das, R.C. (Ed.) Global Tariff War: Economic, Political and Social Implications, Emerald Publishing Limited, Leeds, pp. 67-83. https://doi.org/10.1108/978-1-80071-314-720211006