The Optimal Tariff Is Much Higher Than We Thought
In a working paper circulated this spring, economists Oleg Itskhoki of UCLA and Dmitry Mukhin of the University of Wisconsin-Madison revisit one of the most controversial questions in international economics: when, if ever, should a country impose tariffs? Their answer, framed in elegant mathematical terms and grounded in the financial realities of today’s global economy, is both surprising and—perhaps unintentionally—vindicating of the Trump administration’s trade agenda.
Their central claim is straightforward. Even in a financially sophisticated and deeply globalized world, there is still an…
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