Charles Kindleberger writes in the introduction to /The World in Depression/:

The imposition of tariffs should be expansionary for the importing country, if contractive for the countries losing export markets.

I am not sure if this is right. In the long run, shouldn't the effect of an import tariff lead to an appreciation of the real exchange rate as relative demand for domestic output increases? This appreciation would raise export prices and reduce import prices, undermining the effect of the tariff. However, isn't there also the effect of a tariff (in a large country) on the terms of trade, in which case a tariff allows a country to buy imports more cheaply, which could be expansionary?

Export subsidies should also lead to real appreciation in the long-run, raising export prices and undermining the effect of the subsidy. But here the terms of trade worsens by making exports relatively cheaper. So aren't export subsidies contractionary?


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