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The Impact of the 2018 Tariffs on Prices and Welfare

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  • Mary Amiti
  • Stephen J. Redding
  • David E. Weinstein

Abstract

We examine conventional approaches to evaluating the economic impact of protectionist trade policies. We illustrate these conventional approaches by applying them to the tariffs introduced by the Trump administration during 2018. In the wake of this increase in trade protection, the United States 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 the complete pass-through of the tariffs into domestic prices of imported goods. Therefore, the full incidence of the tariffs has fallen on domestic consumers and importers so far, and our estimates imply a reduction in aggregate US real income of $1.4 billion per month by the end of 2018. We see similar patterns for foreign countries that have retaliated with their own tariffs against the United States, which suggests that the trade war has also reduced the real income of these other countries.

Suggested Citation

  • Mary Amiti & Stephen J. Redding & David E. Weinstein, 2019. "The Impact of the 2018 Tariffs on Prices and Welfare," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 187-210, Fall.
  • Handle: RePEc:aea:jecper:v:33:y:2019:i:4:p:187-210
    Note: DOI: 10.1257/jep.33.4.187
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    References listed on IDEAS

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    Cited by:

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    2. Kris James Mitchener & Kirsten Wandschneider & Kevin Hjortshøj O’Rourke, 2021. "The Smoot-Hawley Trade War," Oxford Economic and Social History Working Papers _188, University of Oxford, Department of Economics.
    3. Giorgia Giovannetti & Enrico Marvasi & Arianna Vivoli, 2021. "The asymmetric effects of 20 years of tariff reforms on Egyptian workers," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 89-130, April.
    4. Owoye, Oluwole & Onafowora, Olugbenga A., 2020. "United States-China Trade War And The Emergence Of Global Covid-19 Pandemic," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(4), pages 435-466.
    5. Besedes, Tibor & Kohl, Tristan & Lake, James, 2020. "Phase out tariffs, phase in trade?," Journal of International Economics, Elsevier, vol. 127(C).
    6. Mary Amiti & Sang Hoon Kong & David Weinstein, 2020. "The Effect of the U.S.-China Trade War on U.S. Investment," NBER Working Papers 27114, National Bureau of Economic Research, Inc.
    7. Julian Hinz & Elsa Leromain, 2020. "Critically Important: The Heterogeneous Effect of Diplomatic Tensions on Trade," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(2), pages 309-331, September.
    8. Rita Cappariello & Sebastian Franco-Bedoya & Vanessa Gunnella & Gianmarco Ottaviano, 2020. "Rising protectionism and global value chains: quantifying the general equilibrium effects," CEP Discussion Papers dp1682, Centre for Economic Performance, LSE.
    9. Wolfgang Lechthaler & Mariya Mileva, 2021. "The Dynamic And Distributional Aspects Of Import Tariffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 199-241, February.
    10. Jie Wu & Jacob Wood & Xianhai Huang, 2021. "How does GVC reconstruction affect economic growth and employment? Analysis of USA–China decoupling," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 35(1), pages 67-81, May.
    11. Mauro Caselli & Andrea Fracasso & Stefano Schiavo, 2021. "Trade policy and firm performance: introduction to the special section," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 1-6, April.
    12. Davenport, Alex & Dorn, David & Levell, Peter, 2021. "Import Competition and Public Attitudes towards Trade," CEPR Discussion Papers 16339, C.E.P.R. Discussion Papers.
    13. Meinen, Philipp & Schulte, Patrick & Cigna, Simone & Steinhoff, Nils, 2019. "The impact of US tariffs against China on US imports: Evidence for trade diversion?," Discussion Papers 46/2019, Deutsche Bundesbank.
    14. Ricardo Reyes-Heroles & Sharon Traiberman & Eva Van Leemput, 2020. "Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(3), pages 456-508, September.
    15. Ajzenman, N. & Cavalcanti, T. & Da Mata, D., 2020. "More than Words: Leaders' Speech and Risky Behavior During a Pandemic," Cambridge Working Papers in Economics 2034, Faculty of Economics, University of Cambridge.
    16. Yuhan Zhang & Cheng Chang, 2020. "Modeling the US-China trade conflict: a utility theory approach," Papers 2010.12351, arXiv.org.
    17. Zhang, Yuhan & Chang, Cheng, 2021. "Modeling the US-China Trade Conflict: A Utility Theory Approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 84-88.
    18. Martin Braml, 2020. "Beggar-thy-Neighbor or Favor thy Industry? An Empirical Review of Transatlantic Tariff Retaliation," ifo Working Paper Series 326, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    19. Ayberk SEKER & Oktay Kaan HÜGÜL, 2021. "How Trade Wars Affect Exports of the Belt and Road Countries: New Evidence from Dynamic Panel Data Analysis," Management and Economics Review, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 6(1), pages 82-98, JUNE.
    20. Liu, Nan, 2020. "Trade war from the Chinese trenches," MPRA Paper 103929, University Library of Munich, Germany.
    21. Giorgia Giovannetti & Enrico Marvasi & Arianna Vivoli, 2020. "The asymmetric effects of twenty years of tariff reforms on Egyptian workers," Working Papers LuissLab 20156, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    22. Liu, Nan, 2020. "Trade war from the Chinese trenches," MPRA Paper 110175, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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