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

Author

Listed:
  • Mary Amiti
  • Stephen J. Redding
  • David Weinstein

Abstract

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.

Suggested Citation

  • Mary Amiti & Stephen J. Redding & David Weinstein, 2019. "The Impact of the 2018 Trade War on U.S. Prices and Welfare," CEP Discussion Papers dp1603, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1603
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Europe Not Feeling Much Pain From Trump Tariffs, Central Bank Says
      by ? in Noozilla Top on 2019-04-24 07:30:13

    Citations

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    Cited by:

    1. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson, 2019. "Exchange Rates and Consumer Prices: Evidence from Brexit," CESifo Working Paper Series 8001, CESifo.
    2. Laurence Wicht, 2019. "The impact of trade tensions on Switzerland: A quantitative assessment," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 70(01), pages 1-34, December.
    3. Lorenzo Trimarchi, 2020. "Trade Policy and the China Syndrome," Working Papers ECARES 2020-15, ULB -- Universite Libre de Bruxelles.
    4. Mao, Haiou & Görg, Holger, 2019. "Friends like this: The impact of the US-China trade war on global value chains," KCG Working Papers 17, Kiel Centre for Globalization (KCG).
    5. Xavier Jaravel & Erick Sager, 2019. "What are the Price Effects of Trade? Evidence from the US and Implications for Quantitative Trade Models," CEP Discussion Papers dp1642, Centre for Economic Performance, LSE.
    6. Martin T. Braml & Marina Steininger & Martin Braml, 2019. "Verschenkter Wohlstand? Handelseffekte der chinesischen Yuan-Abwertung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(20), October.
    7. Mary Amiti & Stephen J. Redding & David E. Weinstein, 2020. "Who's Paying for the US Tariffs? A Longer-Term Perspective," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 541-546, May.
    8. Charles Ka Yui Leung & Joe Cho Yiu Ng & Edward Tang, 2020. "Why is the Hong Kong Housing Market Unaffordable? Some Stylized Facts and Estimations," Globalization Institute Working Papers 380, Federal Reserve Bank of Dallas.
    9. SUN Chang & TAO Zhigang & YUAN Hongjie & ZHANG Hongyong, 2019. "The Impact of the US-China Trade War on Japanese Multinational Corporations," Discussion papers 19050, Research Institute of Economy, Trade and Industry (RIETI).
    10. Fritz Breuss & Elisabeth Christen, 2019. "Policy Brief: Trump's Trade Wars. Implications for the EU and China," WIFO Studies, WIFO, number 61914, Juni.
    11. Felbermayr, Gabriel & Sandkamp, Alexander, 2020. "The trade effects of anti-dumping duties: Firm-level evidence from China," European Economic Review, Elsevier, vol. 122(C).
    12. Blanchard, Emily & Bown, Chad P. & CHOR, HAN PING DAVIN, 2019. "Did Trump's Trade War Impact the 2018 Election?," CEPR Discussion Papers 14091, C.E.P.R. Discussion Papers.
    13. Alberto Cavallo & Gita Gopinath & Brent Neiman & Jenny Tang, 2019. "Tariff Passthrough at the Border and at the Store: Evidence from US Trade Policy," NBER Working Papers 26396, National Bureau of Economic Research, Inc.
    14. Fiorentini, Riccardo, 2020. "The Persisting US Trade Deficit: Is Protectionistm the Right Answer?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 155-186.
    15. Martin T. Braml & Marina Steininger & Martin Braml, 2020. "Giving Away Wealth? Trade Effects of the Yuan Devaluation," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 20(04), pages 32-35, January.
    16. Bekkers, Eddy & Schroeter, Sofia, 2020. "An economic analysis of the US-China trade conflict," WTO Staff Working Papers ERSD-2020-04, World Trade Organization (WTO), Economic Research and Statistics Division.
    17. Jungran Cho & Emma Kyoungseo Hong & Jeongho Yoo & Inkyo Cheong, 2020. "The Impact of Global Protectionism on Port Logistics Demand," Sustainability, MDPI, Open Access Journal, vol. 12(4), pages 1-17, February.
    18. Sascha Tobias Wengerek, 2020. "Share price reactions to tariff imposition announcements in the Trump era - An event study of the trade conflict," Working Papers Dissertations 59, Paderborn University, Faculty of Business Administration and Economics.
    19. Annicchiarico, Barbara & Marvasi, Enrico, 2019. "Protection for sale under monopolistic competition: Beyond the CES," European Journal of Political Economy, Elsevier, vol. 60(C).
    20. Aaron Flaaen & Justin R. Pierce, 2019. "Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector," Finance and Economics Discussion Series 2019-086, Board of Governors of the Federal Reserve System (U.S.).
    21. Agnieszka Hajdukiewicz & Bożena Pera, 2020. "International Trade Disputes over Renewable Energy—the Case of the Solar Photovoltaic Sector," Energies, MDPI, Open Access Journal, vol. 13(2), pages 1-23, January.

    More about this item

    Keywords

    international trade; tariffs; trade war;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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