Tariff Changes by Turkey During the Covid-19 Pandemic: Impact on Import Value and Import Prices

Turkey introduced additional customs duties on 5,088 products for a temporary period in 2020. This study investigates the impact of the changes in effective tariff rates on quarterly import value and prices using monthly trade data at 12-digit product – country breakdown. Although the product range affected from the tariff rate hikes is quite wide, the regulations affected only 6.5% of total imports since the majority of top trade partners are excluded from the additional custom duties via existing bilateral trade agreements. Country-product level regression analysis suggests that a one percentage point increase in effective tariff rates reduces the import value by 1.24 percent. There is no evidence of heterogeneity at product level despite Turkey’s market power in certain product groups. There is also no statistically significant impact on import prices therefore the price cost of increased tariff rates is entirely borne by the Turkish firms and consumers. Overall, the regression results imply that the temporary increases in additional customs duty rates with 6 different regulations reduced the total import value by about 0.9% in the third quarter of 2020.