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What Determines State Heterogeneity in Response to US Tariff Changes?

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 structural framework to identify the sources of cross-state heterogeneity in response to US tariff changes. We quantify the effects of unilaterally increasing US tariffs by 25 percentage points across sectors. Welfare changes range from -0.8 percent in Oregon to 2.1 percent in Montana. States gain more when their sectoral comparative advantage covaries negatively with that of the aggregate US. Consequently, ``preferred'' changes in tariffs vary systematically across states, indicating the importance of transfers in aligning state preferences over trade policy. Foreign retaliation substantially reduces the gains across states while perpetuating the cross-state variation.

Suggested Citation

  • Ana Maria Santacreu & Michael Sposi & Jing Zhang, 2023. "What Determines State Heterogeneity in Response to US Tariff Changes?," Departmental Working Papers 2302, Southern Methodist University, Department of Economics.
    • Handle: RePEc:smu:ecowpa:2302
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    Cited by:

    1. Daniel Carroll & Sewon Hur, 2023. "On The Distributional Effects Of International Tariffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1311-1346, November.
    2. Céline Poilly & Fabien Tripier, 2023. "Regional Trade Policy Uncertainty," Working Papers hal-04239322, HAL.

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    More about this item

    Keywords

    Interstate trade; Gains from trade; Customs union.;
    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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