Abstract Using a perfectly competitive, general equilibrium model of international trade, specific import tariffs, specific export taxes and ad valorem trade taxes are compared in a trade war. A trade war is modelled as a Nash equilibrium in trade policies, where each country can choose to use ad valorem trade taxes (import tariffs or export taxes, which are equivalent), specific import tariffs or specific export taxes. In the two‐country case, where there is a negative terms of trade externality a specific export tax dominates a specific import tariff or ad valorem trade taxes. Hence, the Lerner symmetry theorem does not hold for specific trade taxes in a trade war. This result continues to hold when the model is extended to the case of many countries assuming that there is a negative terms of trade externality. In a trade‐policy game where two countries export the same good so that there is a positive terms of trade externality in the trade‐policy game between these two countries, the results are reversed, with a specific import tariff dominating a specific export tax or ad valorem trade taxes. Hence, the Lerner symmetry theorem again does not hold for specific trade taxes.
Āzacis et al. (Mon,) studied this question.