The Price Effects and Incidence of Recent U.S. Tariff Actions
Paper Session
Sunday, Jan. 3, 2027 8:00 AM - 10:00 AM (EST)
- Chair: Mine Senses, Johns Hopkins University
Did Foreigners Pay America’s Tariffs?
Abstract
The 2018–2019 U.S. tariffs more than doubled customs duties collected, and the prices paid by U.S. importers rose one-for-one with them. This does not mean that U.S. buyers bore all the incidence of the tariffs. For a buyer who purchases along a price schedule, where unit prices fall with order size, an envelope argument shows that her first-order welfare loss depends on the shift in the price schedule she faces, not on the total realized price change. Using administrative transaction-level data on the universe of U.S. imports, we document that such schedules are pervasive. The price schedule U.S. importers faced shifted up by 60 percent of the tariff, not 100 percent. We find domestic buyers bore around 60 cents of each tariff dollar collected, and foreign exporters bore the rest.Tariff Pass-through and Import Reallocation
Abstract
We study how U.S. tariff hikes in 2025 have transmitted to import prices. Consistent with recent evidence, we find that duty-exclusive import prices at the variety (country-product) level do not adjust to tariffs, implying full pass-through to duty-inclusive prices at the border. At the product level, however, duty-exclusive aggregate import prices decline significantly with tariff increases. We show that this product-level decline is driven by within-product reallocation toward lower-priced sources—stronger in products facing larger tariff hikes—and operates primarily through the entry of lower-priced varieties and the exit of higher-priced ones. Estimates of variety appeal indicate that part of this reallocation reflects shifts toward lower-quality varieties, a channel that is also present in the 2018–19 U.S.–China tariff episode. These reallocation effects carry implications for consumer welfare and productivity through the quality of imported goods and inputs.Who Pays for Tariffs Along the Supply Chain? Evidence from European Wine Tariffs
Abstract
We study how tariffs affect prices along the supply chain using product-level data from a large U.S. wine importer during the 2019-2021 U.S. tariffs on European wines. Combining confidential transaction prices with foreign suppliers, U.S. distributors, and retail prices, we trace tariff pass-through from producers to consumers. Pass-through at the border is incomplete, yet consumers paid more than the tariff revenue collected. The dollar markups per bottle for the importer contracted, but expanded for the combined distributor-retailer segment. Price changes along the chain reached consumers after one year. We also document tariff engineering that biases unit values in trade statistics.Importers Big and Small: The Heterogeneous Impacts of U.S.-China Tariffs on Sourcing and Prices
Abstract
This paper studies how importing firms adjust to the 2018–19 U.S. tariffs on Chinese goods. Rather than focusing solely on imports the U.S. continues to source from China, our approach captures changes in unit values and sourcing behavior as heterogeneous importers reallocate purchases across countries. After an initial tariff-driven increase in unit values for all importers, the higher costs persist only for small importers, while prices paid by big importers fall below pre-tariff levels. The more benign adjustment for big importers is driven by lower unit values in arm’s-length imports from China---consistent with bargaining power over suppliers---and by less costly reallocation to alternative source countries, reflecting their broader supplier networks and more established international operations.JEL Classifications
- F1 - Trade
- E3 - Prices, Business Fluctuations, and Cycles