US firms and consumers, not China, paying for Trump’s tariffs
- New study shows duties had no major impact on foreign export prices, suggesting US is bearing almost all the burden in most sectors
- Steel tariffs, meant to protect US industry from dumping practices by countries like China, failing to save jobs, researchers say
American companies and consumers are paying almost the full cost of US tariffs, and the impact of those duties on import volume magnifies over time, according to a paper circulated on Monday by the National Bureau of Economic Research.
Traditional trade theory would suggest tariffs levied by the US should cause foreign firms to lower prices and thereby force them to shoulder the cost of the duties.
However, the study by Federal Reserve Bank of New York researcher Mary Amiti and professors Stephen Redding of Princeton and David Weinstein of Columbia shows the levies have not had a major impact on foreign export prices, suggesting American firms and consumers bear almost all the burden in most sectors as companies work to reorganise supply chains.
“Among goods that continue to be imported, a 10 per cent tariff is associated with about a 10 per cent drop in imports for the first three months, but this elasticity doubles in magnitude in subsequent months,” the authors wrote. That suggests “the 2018 tariffs – many of which were applied in October – are only now having their full impact on US import volumes”.
A separate working paper circulated by NBER on Monday showed the 2018-19 tariffs also damped US exports.
While Americans bear the cost of tariffs in most sectors, the same does not apply in the politically important steel industry, the study by Amiti, Redding and Weinstein showed.