The Quarterly Journal of Economics· 2019Q1
The Return to Protectionism*
- 845citations
- Q1SCImago
- 2019year
Short summary
US import tariffs and retaliatory tariffs imposed in 2018 caused a $51 billion loss to US consumers and firms, equivalent to 0.27% of GDP, due to complete pass-through of tariffs to import prices.
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Key points
- US import and retaliatory tariffs in 2018 led to significant drops in imports and exports.
- Tariffs were fully passed through to import prices, causing no price decrease for targeted goods.
- US consumers and firms faced losses of $51 billion (0.27% of GDP) due to higher import prices.
- Aggregate real income loss was $7.2 billion (0.04% of GDP) after considering revenue and domestic gains.
- Trade-exposed workers in Republican counties were disproportionately harmed by retaliatory tariffs.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract After decades of supporting free trade, in 2018 the United States raised import tariffs and major trade partners retaliated. We analyze the short-run impact of this return to protectionism on the U.S. economy. Import and retaliatory tariffs caused large declines in imports and exports. Prices of imports targeted by tariffs did not fall, implying complete pass-through of tariffs to duty-inclusive prices. The resulting losses to U.S. consumers and firms that buy imports was $51 billion, or 0.27% of GDP. We embed the estimated trade elasticities in a general-equilibrium model of the U.S. economy. After accounting for tariff revenue and gains to domestic producers, the aggregate real income loss was $7.2 billion, or 0.04% of GDP. Import tariffs favored sectors concentrated in politically competitive counties, and the model implies that tradeable-sector workers in heavily Republican counties were the most negatively affected due to the retaliatory tariffs. JEL Code: F1.
The authors' abstract, as published at the source. The Quarterly Journal of Economics, 2019 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance