This blog post covers the relationship between tariff rates and various economic factors according to my learning and reading of multiple published work. Allow me to start with the equation that I will be discussing.
where
T: “Tariff Rate” (This will work out to be a fraction but can be converted to a percentage.)
TD: “Revenue” (This is equal to either tariff deficit or surplus, depending on tariffs for imports versus exports.)
TI: “Total Imports” (The total value of goods imported into a country.)
NTB: “Non-Tariff Barriers” (Trade restrictions that do not directly involve tariffs, such as quotas and regulations.)
E: “Elasticity” (This is the elasticity due to the economic factors like demand for imports, which will represent how sensitive the quantity demanded of imports varies with changes in price.)
ER: “Exchange Rate” (The value of one currency in terms of another.)
G: “Growth” (The rate at which a country’s economy is expanding, and Government response, factors that influence and are influenced by the GDP of each nation.)
I: “Inflation Rate” (The rate at which the general level of prices for goods and services is rising.)
C: “Cost” (This represents any additional costs associated with importing goods, such as transportation, insurance, or handling fees. It adjusts the tariff calculation to reflect the true cost of imports.)
Considerations for Correctness
[1] Logical Structure: The formula logically combines the effects of tariffs, non-tariff barriers, costs, exchange rates, growth, and inflation. It aims to provide a comprehensive view of trade revenue.
[2] Units and Dimensions: It must be ensured that all terms are dimensionally consistent.
[3] Economic Context: The formula should be applicable in the context of the specific economic model I am using. [Different economic models may have variations in how these variables interact].
My discussion above also tries to incorporate time variations without going into detailed Mathematical DERIVATIVE AND INTEGRAL formulas. For extensive references, please consult the THREE publications listed below in the LINKS (the links provide access to PDF files that can be downloaded for studying).