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The Price Impact of Canadian Retaliatory Tariffs

Author

Listed:
  • Alberto Cavallo
  • Olena Kostyshyna
  • Oleksiy Kryvtsov
  • Matías Vieyra

Abstract

How do import tariffs affect retail prices? We combine daily product-level posted prices from seven major Canadian retailers with product-level tariff exposure to estimate tariff effects in a difference-in-differences framework. Prices of tariffed goods rose gradually, peaking at 6% after three months, implying pass-through of roughly one quarter of the 25% tariff. We find little spillover to untariffed substitutes and a rapid reversal of price effects after tariff removal. Adjustment occurred mainly through the frequency of price changes. Pass-through shifted with trade-policy news and was larger for products labeled “Tariffed”, showing that tariff-induced inflation depends on policy expectations and tariff salience.

Suggested Citation

  • Alberto Cavallo & Olena Kostyshyna & Oleksiy Kryvtsov & Matías Vieyra, 2026. "The Price Impact of Canadian Retaliatory Tariffs," Staff Working Papers 26-22, Bank of Canada.
    • Handle: RePEc:bca:bocawp:26-22
    DOI: 10.34989/swp-2026-22
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    References listed on IDEAS

    as
    1. Emi Nakamura & Dawit Zerom, 2010. "Accounting for Incomplete Pass-Through," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(3), pages 1192-1230.
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    3. Kyle Handley & Fariha Kamal & Ryan Monarch, 2025. "Rising Import Tariffs, Falling Exports: When Modern Supply Chains Meet Old-Style Protectionism," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 208-238, January.
    4. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    5. Arindrajit Dube & Daniele Girardi & Òscar Jordà & Alan M. Taylor, 2025. "A Local Projections Approach to Difference‐in‐Differences," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(7), pages 741-758, November.
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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