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Paul Krugman@pkrugman.bsky.social |
How high you have to go in the end depends on how much prices affect import demand — the elasticity. I assume an elasticity of 1, which is what you sometimes get for the medium run, although the long run is probably higher (which makes it worse) 4/
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Paul Krugman
@pkrugman.bsky.social
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With an elasticity of 1, the estimate looks like this: t*14/(1+t) = 8 Work this through, and the tariff rate is 8/6 = 1.33, that is, 133 percent. With a higher elasticity, it would go higher, maybe to infinity 5/
1 replies 3 reposts 31 likes