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Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism

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Abstract

We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and they represent 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.

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  • Kyle Handley & Fariha Kamal & Ryan Monarch, 2020. "Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism," International Finance Discussion Papers 1270, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:1270
    DOI: 10.17016/IFDP.2020.1270
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    Cited by:

    1. Ma, Hong & Ning, Jingxin & Xu, Mingzhi (Jimmy), 2021. "An eye for an eye? The trade and price effects of China's retaliatory tariffs on U.S. exports," China Economic Review, Elsevier, vol. 69(C).
    2. Pol Antràs, 2020. "De-Globalisation? Global Value Chains in the Post-COVID-19 Age," NBER Working Papers 28115, National Bureau of Economic Research, Inc.
    3. Lionel Fontagné & Cecilia Bellora, 2019. "Shooting oneself in the foot? US trade policy coping with Global Value Chains," Post-Print hal-02128135, HAL.
    4. Pol Antràs & Teresa C. Fort & Agustín Gutiérrez & Felix Tintelnot, 2022. "Trade Policy and Global Sourcing: An Efficiency Rationale for Tariff Escalation," NBER Working Papers 30225, National Bureau of Economic Research, Inc.
    5. Cole, Matthew T. & Lake, James & Zissimos, Ben, 2021. "Contesting an international trade agreement," Journal of International Economics, Elsevier, vol. 128(C).
    6. Michael Funke & Adrian Wende, 2021. "The US-China Phase One Trade Deal: An Economic Analysis of the Managed Trade Agreement," CESifo Working Paper Series 8945, CESifo.
    7. Bown, Chad P., 2021. "The US–China trade war and Phase One agreement," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 805-843.
    8. Freund,Caroline & Maliszewska,Maryla & Mattoo,Aaditya & Ruta,Michele, 2020. "When Elephants Make Peace : The Impact of the China-U.S. Trade Agreement on Developing Countries," Policy Research Working Paper Series 9173, The World Bank.
    9. Pablo Fajgelbaum & Pinelopi K. Goldberg & Patrick Kennedy & Amit Khandelwal & Daria Taglioni, 2021. "The US-China Trade War and Global Reallocations," Working Papers 2021-80, Princeton University. Economics Department..
    10. World Bank, "undated". "World Bank East Asia and Pacific Economic Update, April 2020," World Bank Publications - Reports 33477, The World Bank Group.
    11. 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.
    12. Jaime de Melo & Anna Twum, 2020. "The long Road towards Supply Chain Trade in Africa," Post-Print hal-02865529, HAL.
    13. He, Chuan & Mau, Karsten & Xu, Mingzhi, 2021. "Trade Shocks and Firms Hiring Decisions: Evidence from Vacancy Postings of Chinese Firms in the Trade War," Labour Economics, Elsevier, vol. 71(C).
    14. 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.
    15. James Lake & Jun Nie, 2022. "The 2020 US Presidential Election and Trump's Trade War," CESifo Working Paper Series 9669, CESifo.
    16. Cecilia Bellora & Lionel Fontagné, 2019. "Shooting Oneself in the Foot? Trade War and Global Value Chains," Working Papers 2019-18, CEPII research center.
    17. Basker, Emek & Kamal, Fariha, 2021. "Recall and response: Relationship adjustments to adverse information shocks," European Economic Review, Elsevier, vol. 139(C).
    18. Liu, Nan, 2020. "Trade war from the Chinese trenches," MPRA Paper 103929, University Library of Munich, Germany.
    19. Felix Bierbrauer, 2022. "Nachhaltigkeitsziele und das Lieferkettengesetz [Sustainability Goals and Supply Chain Due Diligence Laws]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(5), pages 344-346, May.
    20. He, Chuan & Mau, Karsten & Xu, Mingzhi, 2021. "Trade Shocks and Firms Hiring Decisions:," Research Memorandum 001, Maastricht University, Graduate School of Business and Economics (GSBE).
    21. 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

    Keywords

    Global supply chains; Tariffs; Trade war; U.S. exports;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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