Discussion Paper Details

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Title: Who's Paying for the U.S. Tariffs? A Longer-Term Perspective

Author(s): Mary Amiti, Stephen J. Redding and David E. Weinstein

Publication Date: December 2019

Keyword(s): Passthrough, tariffs and Trade War

Programme Area(s): International Trade and Regional Economics

Abstract: Using data from 2018, a number of studies have found that recent U.S tariffs have been passed on entirely to U.S. importers and consumers. These results are surprising given that trade theory has long stressed that tariffs applied by a large country should drive down foreign prices. Using another year of data including significant escalations in the trade war, we find that U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers. We show that the response of import values to the tariffs increases in absolute magnitude over time, consistent with the idea that it takes time for firms to reorganize supply chains. We find heterogeneity in the responses of some sectors, such as steel, where tariffs have caused foreign exporters to drop their prices substantially, enabling them to export relatively more than in sectors where tariff passthrough was complete.

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Bibliographic Reference

Amiti, M, Redding, S and Weinstein, D. 2019. 'Who's Paying for the U.S. Tariffs? A Longer-Term Perspective'. London, Centre for Economic Policy Research.