Retaliatory Temporary Trade Barriers: New Facts and Patterns

Abstract This paper takes a fresh look into the role of Temporary Trade Barriers (TTBs) and whether they are introduced for strategic reasons. We construct a novel sectoral measure of retaliation using daily bilateral data on TTB responses in 1220 subsectors across a panel of 25 advanced and emerging economies over 1989-2015. We use this measure to present novel stylized facts and patterns suggesting that strategic considerations may be more important (in terms of intensity and frequency) than commonly understood from the existing literature, which has tended to ignore within-year responses. Our evidence indicates that retaliation actually often consists of responses across many sectors and indeed that same-sector retaliation is far from being the norm.