Tariff cuts and US net potential benefits: the case of the US and Mexico

Abstract

This paper seeks to investigate US net potential benefits of merchandise imports from Mexico under tariff reductions. It applies a partial equilibrium framework which is static and highly aggregative in nature. The results suggest that the magnitudes of US net potential benefits of tariff cuts on merchandise imports from Mexico are conditional upon periods of duration of unemployment, discount rates, price elasticities of supply and demand, and existing tariff situations (high or low). Hence, the findings of the paper suggest that the US potential benefits and costs of merchandise imports from Mexico under tariff cuts should be weighed quite carefully.