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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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    References listed on IDEAS

    as
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    Cited by:

    1. Daniel R. Carroll & Sewon Hur, 2020. "On the Distributional Effects of International Tariffs," Working Papers 20-18R, Federal Reserve Bank of Cleveland, revised 15 Feb 2022.
    2. 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.

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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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