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A Quantitative Analysis of Tariffs across U.S. States

Author

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  • Ana Maria Santacreu

    (Federal Reserve Bank of Saint Louis)

  • Jing Zhang

    (Federal Reserve Bank of Chicago)

  • Michael Sposi

    (Southern Methodist University)

Abstract

We build a multisector general equilibrium model of trade to quantify the effect of U.S. tariffs both at the national and global level. The model incorporates region-specific input-output linkages, endogenous capital accumulation and endogenous trade imbalances. We estimate sector-specific bilateral trade frictions and productivity levels for 50 U.S. states and 41 non-U.S. countries across 2 sectors of the economy using detailed bilateral trade and production data. We then simulate welfare Laffer curves for each state by varying the U.S. tariff rate. We consider two cases: (i) No retaliation from the foreign countries and (ii) Tit-for-Tat retaliation. We find that the tariff rate that maximizes consumption varies across states and it ranges from 14% to 45% when there is no retaliation and from 0% to 13% when there is retaliation. Furthermore, we find that these tariffs correlate negatively with the ratio of foreign exports to GDP.

Suggested Citation

  • Ana Maria Santacreu & Jing Zhang & Michael Sposi, 2019. "A Quantitative Analysis of Tariffs across U.S. States," 2019 Meeting Papers 259, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:259
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    References listed on IDEAS

    as
    1. Fabian Eckert, 2019. "Growing Apart: Tradable Services and the Fragmentation of the U.S. Economy," 2019 Meeting Papers 307, Society for Economic Dynamics.
    2. Sposi, Michael, 2019. "Evolving comparative advantage, sectoral linkages, and structural change," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 75-87.
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    4. Dai, Mian & Yotov, Yoto & Zylkin, Thomas, 2013. "On the Trade-diversion Effects of Free Trade Agreements," School of Economics Working Paper Series 2013-3, LeBow College of Business, Drexel University, revised 15 Sep 2014.
    5. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    6. Coşar, A. Kerem & Demir, Banu, 2016. "Domestic road infrastructure and international trade: Evidence from Turkey," Journal of Development Economics, Elsevier, vol. 118(C), pages 232-244.
    7. Giri, Rahul & Yi, Kei-Mu & Yilmazkuday, Hakan, 2021. "Gains from trade: Does sectoral heterogeneity matter?," Journal of International Economics, Elsevier, vol. 129(C).
    8. Dai, Mian & Yotov, Yoto V. & Zylkin, Thomas, 2014. "On the trade-diversion effects of free trade agreements," Economics Letters, Elsevier, vol. 122(2), pages 321-325.
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    Cited by:

    1. Makenzie Peake & Ana Maria Santacreu, 2020. "The Economic Effects of the 2018 U.S. Trade Policy: A State-Level Analysis," Review, Federal Reserve Bank of St. Louis, vol. 102(4), pages 385-412, October.
    2. Daniel R. Carroll & Sewon Hur, 2020. "On the Distributional Effects of International Tariffs," Working Papers 20-18, Federal Reserve Bank of Cleveland.

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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