Tariff Passthrough at the Border and at the Store: Evidence from Us Trade Policy

37 Pages Posted: 30 Oct 2019 Last revised: 4 Nov 2019

See all articles by Alberto Cavallo

Alberto Cavallo

Harvard University - Business School (HBS)

Gita Gopinath

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Brent Neiman

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Jenny Tang

Federal Reserve Banks - Federal Reserve Bank of Boston

Multiple version iconThere are 3 versions of this paper

Date Written: October 2019

Abstract

We use micro data collected at the border and at retailers to characterize the effects of recent changes in US trade policy -- particularly the tariffs placed on imports from China -- on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting that incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of China’s renminbi is unlikely to alter this conclusion. Next, using product-level data from several large retailers, we demonstrate that the tariffs’ impact on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers' imports increased after the initial announcement of possible tariffs, but before their full implementation, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.

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Suggested Citation

Cavallo, Alberto and Gopinath, Gita and Neiman, Brent and Tang, Jenny, Tariff Passthrough at the Border and at the Store: Evidence from Us Trade Policy (October 2019). NBER Working Paper No. w26396. Available at SSRN: https://ssrn.com/abstract=3476476

Alberto Cavallo (Contact Author)

Harvard University - Business School (HBS) ( email )

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Gita Gopinath

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
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National Bureau of Economic Research (NBER) ( email )

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Brent Neiman

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/brent.neiman/index.html

National Bureau of Economic Research (NBER) ( email )

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Jenny Tang

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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