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Price Effects of US-China Trade Wars

Author

Listed:
  • Thuy Hang Duong
  • Weifeng Larry Liu

Abstract

This paper examines the short-run price effects of US tariffs during the Trump administrations. Using a monthly industry-level event-study with staggered treatment timing, we estimate their impacts on domestic producer price inflation across two trade war episodes over 2018-2019 and 2024-2025. The results show that tariffs increased inflation in both episodes, but the magnitude and persistence differed. In 2018-2019, tariffs led to large and sustained price increases, driven by strong cost pass-through from imported intermediate inputs from China. In contrast, in 2024-2025, despite more aggressive tariff measures, inflationary effects were not proportionally larger and dissipated more quickly. This attenuation reflects global supply chain reallocation following the first US-China trade war and the COVID-19 pandemic, as US firms diversified away from Chinese inputs, weakening input-cost transmission.

Suggested Citation

  • Thuy Hang Duong & Weifeng Larry Liu, 2026. "Price Effects of US-China Trade Wars," CAMA Working Papers 2026-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2026-30
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    File URL: https://crawford.anu.edu.au/sites/default/files/2026-05/30_2026_Duong_Liu_0.pdf
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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
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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