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Bilateral trade wars
Journal article   Peer reviewed

Bilateral trade wars

Mordechai E. Kreinin, Elias Dinopoulos and Constantinos Syropoulos
The International trade journal, v 10(1), pp 3-20
01 Mar 1996

Abstract

The paper constructs a three-country, two-good general equilibrium model to analyze the welfare effects of bilateral trade wars. The presence of a third country (or a number of countries) pursuing free trade policies alters several results based on a two-country framework: Regardless of whether tariffs or quotas are used, bilateral trade wars need not eliminate trade between the two retaliating countries; even a "small" retaliating country can win a bilateral trade war; and quotas can be welfare-superior to tariffs under bilateral retaliation.

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