DP13564 The Impact of the 2018 Trade War on U.S. Prices and Welfare

Author(s): Mary Amiti, Stephen J. Redding, David E. Weinstein
Publication Date: March 2019
Date Revised: March 2019
Keyword(s): International trade, tariffs, Trade War
JEL(s): F13, F14
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13564

This paper explores the impacts of the Trump administration's trade policy on prices and welfare. Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. We also see similar patterns for foreign countries who have retaliated against the U.S., which indicates that the trade war also reduced real income for other countries.