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Hey, just needed to solve this problem I have. I have learnt that retaliation effects only occur for Tarrifs when countries adopt protectionist policies. However, my question is, theoretically, do they apply for other protectionist policies (etc: subsidies). \

Thanks.

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i've never looked at it formally but i'd imagine so.

if you think of agriculture or car/steel production they are subsidised in many nations as well as operating under tariff protection. it is plausible to envisage a firm in a particular industry lobbying their national government for subsidies in order to compete on a level playing field with foreign firms in their industry that are receiving subsidies for their own govenrment.

it might be an interesting formal research topic. however to disentangle and isolate any 'retailiation' effect in subsidies you'd have to look into the other reasons behind subsidies, and weigh up their relative importance.

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