Optimal Tariff Calculations in Tariff Games with Climate Change Considerations

Yan Dong, John Whalley
JEL codes: 
International Trade and Investment Series

We discuss whether or not the introduction of climate change considerations into Nash tariff games increases or reduces post retaliation tariffs. We briefly discuss how climate change considerations can be introduced into computational trade models. We then calculate optimal tariffs in comparable conventional (no climate change considerations present) and with climate change trade models. Results show that compared to conventional trade models, adding climate change considerations reduces the level of optimal tariffs, but this only occurs when the damage effects involved are large.