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A Quantitative Analysis of Tariffs Across U.S. States

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Abstract

We develop a quantitative framework to assess the cross-state implications of a U.S. trade policy change: a unilateral increase in the import tariff from 2% to 25% across all goods-producing sectors. Although the U.S. gains overall from the tariff increase, we find the impact differs starkly across locations. Changes in real consumption (welfare) range from as high as 3.8% in Wyoming to –0:3% in Florida, depending mainly on how exposed states are to differentially-impacted sectors. As a result, the "preferred" tariff rate varies greatly across states. Foreign retaliation in trade policy substantially reduces the welfare gains across states, while perpetuating the cross-state variation in those gains. The presence of internal trade frictions amplifies the welfare impacts of changes in trade policy.

Suggested Citation

  • Ana Maria Santacreu & Michael Sposi & Jing Zhang, 2021. "A Quantitative Analysis of Tariffs Across U.S. States," Working Paper Series WP-2021-08, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:91993
    DOI: 10.21033/wp-2021-08
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    Cited by:

    1. Makenzie Peake & Ana Maria Santacreu, 2020. "The Economic Effects of the 2018 U.S. Trade Policy: A State-Level Analysis," Review, Federal Reserve Bank of St. Louis, vol. 102(4), pages 385-412, October.
    2. Daniel Carroll & Sewon Hur, 2023. "On The Distributional Effects Of International Tariffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1311-1346, November.

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    More about this item

    Keywords

    International trade; Interstate trade; Welfare gains from trade;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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