Trade barriers lead to foreign firms lowering prices, impacting global competition.
The article explores how trade policies affect pricing and non-pricing strategies of firms selling products. The researchers used a model to study how trade barriers impact competition in the market. The main findings are: when faced with trade restrictions, foreign firms tend to adjust their pricing strategies and reduce their use of non-price tools. Additionally, tariffs may not always lead to price increases for both firms; they can actually cause the foreign firm to lower its prices.