Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy

Alberto  Cavallo; Gita  Gopinath; Brent  Neiman; Jenny  Tang

Working Paper | HBS Working Paper Series | 2019

Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy

by Alberto Cavallo, Gita Gopinath, Brent Neiman and Jenny Tang

Abstract

We use micro data collected at the border and the store to characterize the price impact of recent U.S. trade policy on importers, exporters, and consumers. At the border, import tariff pass-through is much higher than exchange rate pass-through. Chinese exporters did not lower their dollar prices by much, despite the recent appreciation of the dollar. By contrast, U.S. exporters significantly lowered prices affected by foreign retaliatory tariffs. In U.S. stores, the price impact is more limited, suggesting that retail margins have fallen. Our results imply that, so far, the tariffs' incidence has fallen in large part on U.S. firms.

Keywords: Trade policy; tariffs; exchange rate passthrough; Economics; Trade; Policy; Inflation and Deflation; United States; China;

Language: English

Format: Print

21 pages

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Citation:

Cavallo, Alberto, Gita Gopinath, Brent Neiman, and Jenny Tang. "Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy." NBER Working Paper Series, No. 26396, October 2019. (Revised January 2020. Harvard Business School Working Paper, No. 20-041, October 2019)

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Longer Version

This is a longer (older) version of the paper with some additional results.
Appendix

This online Appendix complements the short version of the paper.

In early 2020, a coronavirus pandemic swept the globe, ushering in unprecedented disruptions to the global economy. Both supply and demand were decimated by lockdowns and border closings, as well as reduced spending by fearful consumers. In response, governments around the world made equally unprecedented policy moves, spending trillions of dollars on fiscal stimulus measures to bridge the gap during the self-imposed shutdown. As the pandemic progressed, governments had to weigh the costs between loss of life due to opening up their economies and the economic devastation caused by delaying a reopening.

The HBS COVID-19 Global Policy Tracker is an initiative by the Business, Government and the International Economy (BGIE) unit at Harvard Business School (HBS) to collect and standardize economic policies implemented as a response to the coronavirus pandemic around the world. We focus on fiscal policy, monetary policy, and lockdowns and quantify government responses in common variables, units, and currencies to facilitate cross-country comparisons. The database is updated in real time with the efforts of several dozens of students at HBS and other Harvard schools.

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Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy

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