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A Quantitative Analysis of Tariffs across U.S. States

Author

Listed:
  • Ana Maria Santacreu

    (Federal Reserve Bank of St. Louis)

  • Michael Sposi

    (Southern Methodist University)

  • Jing Zhang

    (Federal Reserve Bank of Chicago)

Abstract

We develop a quantitative framework to assess the cross-state implications of a U.S. trade policy change: a unilateral increase in the import tariff from 2% to 25% across all goods-producing sectors. Although the U.S. gains overall from the tariff increase, we find the impact differs starkly across locations. Changes in real consumption (welfare) range from as high as 3.8% in Wyoming to -0.3% in Florida, depending mainly on how exposed states are to differentially-impacted sectors. As a result, the "preferred" tariff rate varies greatly across states. Foreign retaliation in trade policy substantially reduces the welfare gains across states, while perpetuating the cross-state variation in those gains. The presence of internal trade frictions amplifies the welfare impacts of changes in trade policy.

Suggested Citation

  • Ana Maria Santacreu & Michael Sposi & Jing Zhang, 2021. "A Quantitative Analysis of Tariffs across U.S. States," Departmental Working Papers 2103, Southern Methodist University, Department of Economics.
  • Handle: RePEc:smu:ecowpa:2103
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    File URL: https://ftp1.economics.smu.edu/WorkingPapers/2021/SPOSI/SPOSI-2021-05.pdf
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    More about this item

    Keywords

    International trade; Interstate trade; Welfare gains from trade.;
    All these keywords.

    JEL classification:

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

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