DOI: 10.1257/jep.20251491 ISSN: 0895-3309
Should We Tax Trade? A Pigouvian Perspective
Arnaud Costinot, Iván WerningWe develop a simple and intuitive Pigouvian perspective on optimal trade policy. Our approach unifies a wide range of rationales for taxing trade, from the classical optimal tariff argument to contemporary debates about global carbon emissions and geopolitics. We also clarify when trade policy intervention is warranted and when alternative domestic instruments should be used instead.