Purpose − This study explains a puzzle: most countries realize the mutual benefit of tariff cutting, but tariffs never become zero. Approach − The method is decision-theoretic, and proves the results by example. Findings − The Johnson tariff-ridden equilibrium may be unique, but not the...

It is known that in a two-country, two-good world, the Nash equilibrium of a 'tariff war' of Harry Johnson (1953-4) tends to fail Pareto Optimality. With a demonstration by example, this note shows that it is possible that the attempt for trade liberalization through the removal of tariffs may...