To What Extent Are Tariffs Offset by Exchange Rates?

22 Pages Posted: 5 Feb 2020

See all articles by Olivier Jeanne

Olivier Jeanne

Peterson Institute for International Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 13, 2020

Abstract

In theory, tariffs are partially offset by a currency appreciation in the tariff imposing country or by a depreciation in the country on which the tariff is imposed. Based on a calibrated model, this paper finds that US tariffs imposed in 2018 should not have had a large impact on the dollar but may have significantly depreciated the renminbi. This prediction is consistent with a high-frequency event analysis looking at the impact of tariff-related news on the dollar and the renminbi. Tariff-related news explains about one-third of the renminbi depreciation observed in 2018.

Keywords: Tariffs, Exchange Rates, Dollar, Renminbi

JEL Classification: F31, F42

Suggested Citation

Jeanne, Olivier, To What Extent Are Tariffs Offset by Exchange Rates? (January 13, 2020). Peterson Institute for International Economics Working Paper No. 20-1, 2020, Available at SSRN: https://ssrn.com/abstract=3518477

Olivier Jeanne (Contact Author)

Peterson Institute for International Economics ( email )

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