The Journal of Economic Perspectives· 2019Q1
The Impact of the 2018 Tariffs on Prices and Welfare
- 800citations
- Q1SCImago
- 2019year
Short summary
US tariffs introduced in 2018 led to significant price increases for intermediate and final goods, reduced imported variety availability, and a complete pass-through of tariffs to domestic prices, resulting in an estimated $1.4 billion monthly reduction in US real income by year-end.
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Key points
- US tariffs in 2018 caused significant increases in intermediate and final goods prices.
- Tariffs were fully passed through to domestic prices of imported goods.
- Availability of imported varieties decreased, and supply chains were altered.
- Aggregate US real income was reduced by an estimated $1.4 billion per month by the end of 2018.
- Retaliatory tariffs also negatively impacted foreign countries' real income.
AI-generated from the title and abstract; the full text is not read.
Abstract
We examine conventional approaches to evaluating the economic impact of protectionist trade policies. We illustrate these conventional approaches by applying them to the tariffs introduced by the Trump administration during 2018. In the wake of this increase in trade protection, the United States 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 the complete pass-through of the tariffs into domestic prices of imported goods. Therefore, the full incidence of the tariffs has fallen on domestic consumers and importers so far, and our estimates imply a reduction in aggregate US real income of $1.4 billion per month by the end of 2018. We see similar patterns for foreign countries that have retaliated with their own tariffs against the United States, which suggests that the trade war has also reduced the real income of these other countries.
The authors' abstract, as published at the source. The Journal of Economic Perspectives, 2019 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance