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Did Foreigners Pay America’s Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through

Author

Listed:
  • Sharat Ganapati
  • Colin Hottman

Abstract

Transaction-level quantity discounts are a pervasive feature of US trade, shaping both price variation and tariff incidence. Using administrative microdata, we show that these discounts reflect transaction-level scale economies rather than market power. Accounting for these micro-level economies resolves a key puzzle: while observed import prices rose one-for-one with 2018-2019 US tariffs, we show this was driven by the loss of scale economies as transaction sizes collapsed. Controlling for this scale effect, the strategic pass-through of tariffs to scale-free prices falls to 60 percent, implying foreign exporters absorbed a significant share of the burden through reduced markups.

Suggested Citation

  • Sharat Ganapati & Colin Hottman, 2026. "Did Foreigners Pay America’s Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through," CESifo Working Paper Series 12500, CESifo.
    • Handle: RePEc:ces:ceswps:_12500
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    Keywords

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    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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