ECONOMIC GROWTH AND TARIFF LEVELS IN THE UNITED STATES: A GRANGER CAUSALITY ANALYSIS
ECONOMIC GROWTH AND TARIFF LEVELS IN THE UNITED STATES: A GRANGER CAUSALITY ANALYSIS

Summary/Abstract: The objective of this research is to investigate the causal relationship between economic growth and tariff levels (i.e., levels of trade protection) in the United States. This research empirically examines the relationship between trade protectionism and economic growth using US tariff levels and GDP growth data for the period of 1821-2017. By employing Granger causality analysis, this research finds that, for the United States, GDP growth unidirectionally affects nominal tariff levels over the short term. Generalizing the results, this research provides empirical evidence that economic growth influences the level of trade protection in the United States. Economic conditions, at least in the United States, do in fact affect its trade policies, though US trade policies for either protectionism or liberalization have little impact on the nation’s economic performance (one-way causation from economic growth to trade protectionism in the US). Lastly, this research provides important theoretical and policy implications regarding hegemonic stability theory and recent economic conflicts over tariffs (in March/April 2018 and thereafter) of the United States with China and the European Union.

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