Rationality and trade wars

EDDY BEKKERS, World Trade Organization (WTO)
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JOSEPH F. FRANCOIS, University of Bern - Department of Economics, Centre for Economic Policy Research (CEPR), Vienna Institute of International Economic Studies (WIIW), University of Adelaide - School of Economics
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DOUGLAS NELSON, Tulane University - Department of Economics
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HUGO ROJAS-ROMAGOSA, CPB Netherlands Bureau for Economic Policy Analysis
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This paper assesses the utility of economic theory of rational trade wars to predict such events or to prescribe courses of action to control their consequences. Trade wars are fundamentally political events whose causes are almost completely political and whose consequences are to a significant degree also political. Contemporary economic theory has developed during a uniquely peaceful and liberal period in world history, affecting how economists have thought about trade conflicts, leaving the profession unprepared to provide serious analysis or advice.

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