Date of Award
Croft Institute for International Studies
In this paper, I research the economic distortions caused by a 25% retaliatory tariff placed on French wine by the United States in October 2019. This tariff was enacted as retaliation for airline subsidies provided by various European countries to Airbus and was approved by the WTO as a valid compensation for the loss these subsidies caused to the American company Boeing. In order to view the correlation between fluctuations in US import quantities of French wine and the retaliatory tariff, I estimated the effect of the tariff on the wine market using linear regression analysis. Through this regression, I found a strong connection between the decline in overall French wine import volumes into the US and the beginning of the 25% tariff. I also found evidence of attempts by wine importers to avoid the tariff by importing bulk wine to be bottled in the US, because both the import volume and value per liter of bulk wine rose as a result of the retaliatory tariff. Lastly, I found that the value per liter of French wine imports into the US lowered as a result of the tariff, indicating a reduction in quality. All of these conclusions are consistent with economic theory. This research demonstrates that political policies that are enacted as a result of political disputes can cause economic distortions in markets unrelated to the dispute itself.
Hutson, Katelyn, "The Politics of Taxation: An Economic Analysis of Politically Motivated Tariffs Placed on French Wine by the United States" (2021). Honors Theses. 1716.
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