TY - JOUR AU - Eichengreen,Barry AU - Goulder,Lawrence H. TI - The Impact of Permanent and Temporary Import Surcharges on the U.S. Trade Deficit JF - National Bureau of Economic Research Working Paper Series VL - No. 3391 PY - 1990 Y2 - June 1990 UR - http://www.nber.org/papers/w3391 L1 - http://www.nber.org/papers/w3391.pdf N1 - Author contact info: Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Lawrence H. Goulder Department of Economics Landau Economics Building 328 Stanford University Stanford, CA 94305 Tel: 650/723-3706 Fax: 650/725-5702 E-Mail: goulder@stanford.edu M1 - published as Barry Eichengreen, Lawrence H. Goulder. "The Impact of Permanent and Temporary Import Surcharges on the U.S. Trade Deficit ," in Robert E. Baldwin, editor, "Empirical Studies of Commercial Policy" University of Chicago Press, 1991 (1991) AB - This paper uses analytical and simulation models to study the impact of temporary and permanent import surcharges on the U.S. balance of trade. The analytical model of a two-country, two-commodity, two-period endowment economy brings out the intersectoral and intertemporal substitution effects generated by import surcharges. This model shows that the trade balance impact of these initiatives is ambiguous in sign even under restrictive assumptions. We therefore apply a simulation model to gauge the effects under realistic values for parameters. The simulation model differs from others that have analyzed import surcharges in combining sectoral disaggregation with an integrated treatment of current and capital account transactions. The combination is made possible by the model's attention to both intra- and intertemporal aspects of household and producer decisions. Simulations are performed under different assumptions about the sources of the U.S. trade deficits and the timing of the surcharge. In each case, surcharges strengthen the trade balance in the short run but worsen subsequently. The results highlight the usefulness of analyzing the crade balance effects of commercial policies with a dynamic framework that incorporates intertemporal balance of payments constraints. ER -