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JEL Code

F10, F13, F14, F16, F62

Abstract

The aim of this paper is to study the economic consequences of protectionism from a macroeconomic perspective. For that purpose, we estimate the impact of tariffs on different economic variables as GDP growth, trade volume or unemployment, comparing the effects for two groups of countries: high-income and low-income. For this, we build a regression model to estimate the effects of tariff changes on each of these variables, differentiating between the two groups of countries. Tariffs contribute to increase unemployment, generate lower economic growth and reduce trade volumes, but by how much? This is very relevant in the actual pandemic environment in terms of looking for efficient public policy for economic recovery. This is complemented with an overview of protectionism and trade restrictions in the pandemic environment, and how economic nationalism could affect policymaking in the recovery phase of the actual recession. Multilateralism seems to be at risk due to these political and economic trends, with multilateral organizations having had their role as trade arbiter eroded, which could be a threat to global value chains and free-trade mechanisms. We conclude that recent tariffs have no significant effect on high-income countries, while variables as GDP growth rates or unemployment in low-income countries were more sensitive to variations of tariff rates.

Submission Date

3-3-2021

Approval Date

3-10-2021

Publication Date

3-31-2021

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