The Impact of the 2018 Trade War on U.S. Prices and Welfare

39 Pages Posted: 26 Mar 2019

See all articles by Mary Amiti

Mary Amiti

Federal Reserve Bank of New York

Stephen J. Redding

Princeton University

David E. Weinstein

Columbia University - Graduate School of Arts and Sciences - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: March 2019

Abstract

This paper explores the impacts of the Trump administration’s trade policy on prices and welfare. Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. We also see similar patterns for foreign countries who have retaliated against the U.S., which indicates that the trade war also reduced real income for other countries.

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Suggested Citation

Amiti, Mary and Redding, Stephen J. and Weinstein, David E., The Impact of the 2018 Trade War on U.S. Prices and Welfare (March 2019). NBER Working Paper No. w25672. Available at SSRN: https://ssrn.com/abstract=3359429

Mary Amiti (Contact Author)

Federal Reserve Bank of New York ( email )

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Stephen J. Redding

Princeton University ( email )

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HOME PAGE: http://www.princeton.edu/~reddings/

David E. Weinstein

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

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