# Optimal Trade and Industrial Policies in the Global Economy: A Deep Learning Framework

arXiv: https://arxiv.org/abs/2407.17731 · HTML: https://mlsanity.com/paper/2407.17731/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 5 of its 15 references that are in the map.
- First posted on arXiv 25 Jul 2024.

## Builds on (most cited first, 5 of 5)

- [Adam: A Method for Stochastic Optimization](https://mlsanity.com/paper/1412.6980/) (2014)
- [PyTorch: An Imperative Style, High-Performance Deep Learning Library](https://mlsanity.com/paper/1912.01703/) (2019)
- [A Survey of Large Language Models](https://mlsanity.com/paper/2303.18223/) (2023)
- [TensorFlow: Large-Scale Machine Learning on Heterogeneous Distributed Systems](https://mlsanity.com/paper/1603.04467/) (2016)
- [DeepHAM: A Global Solution Method for Heterogeneous Agent Models with Aggregate Shocks](https://mlsanity.com/paper/2112.14377/) (2021)

## Abstract (arXiv)

We propose a deep learning framework, DL-opt, designed to efficiently solve for optimal policies in quantifiable general equilibrium trade models. DL-opt integrates (i) a nested fixed point (NFXP) formulation of the optimization problem, (ii) automatic implicit differentiation to enhance gradient descent for solving unilateral optimal policies, and (iii) a best-response dynamics approach for finding Nash equilibria. Utilizing DL-opt, we solve for non-cooperative tariffs and industrial subsidies across 7 economies and 44 sectors, incorporating sectoral external economies of scale. Our quantitative analysis reveals significant sectoral heterogeneity in Nash policies: Nash industrial subsidies increase with scale elasticities, whereas Nash tariffs decrease with trade elasticities. Moreover, we show that global dual competition, involving both tariffs and industrial subsidies, results in lower tariffs and higher welfare outcomes compared to a global tariff war. These findings highlight the importance of considering sectoral heterogeneity and policy combinations in understanding global economic competition.