alt Hacker NewsIf tariffs are so obviously and universally bad, then why do tariffed countries respond with retaliatory tariffs instead of letting the first country shoot themselves in the foot and getting on with their own business?
If tariffs are so obviously and universally bad, then why do tariffed countries respond with retaliatory tariffs instead of letting the first country shoot themselves in the foot and getting on with their own business?
Tariffs (and retaliatory tariffs) can be universally economically negative and still be rationally pursued by individual politicians.
For example: if Donald Trump tariffs the country you are in charge of, you are likely willing to pay the economic cost of a retaliatory tariff to seem like you are standing up to America to your constituents. The politician’s goal is to be re-elected.
The politician may aim to deter getting tariffed in the first place, and promising a retaliatory tariff if another country tariffs you first is also reasonable as a deterrent from a game-theoretical perspective.
All it takes is for one world leader to not understand or care about the clear economic negatives to tariffs to start the chain: everyone else can be a rational actor.