Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism

Handley, Kyle; Kamal, Fariha; Monarch, Ryan

doi:10.3386/w26611

Cited by 61 publications

(37 citation statements)

References 23 publications

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“…Flaaen, Hortaçsu and Tintelnot (2019) examine the case of U.S. tariffs imposed on washing machines, showing that tariffs on individual countries can lead to the relocation of production across borders, while tariffs on a broader sets of countries lead to substantial retail price increases for both targeted products and complementary goods. Handley, Kamal and Monarch (2019) find that those firms impacted by U.S. import tariffs respond by reducing U.S. exports, consistent with our finding of the importance of the intermediate input channel. Huang et al (2019) find that the effects of tariffs also carry through to firms' financial performance, with firms more engaged in trade with China experiencing lower stock returns and higher default risk after the announcement of new rounds of tariffs targeting China.…”

Section: Introductionsupporting

confidence: 90%

Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector

Flaaen

Pierce

2019

FEDS

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Since the beginning of 2018, the United States has undertaken unprecedented tariff increases, with one goal of these actions being to boost the manufacturing sector. In this paper, we estimate the effect of the tariffs-including retaliatory tariffs by U.S. trading partners-on manufacturing employment, output, and producer prices. A key feature of our analysis is accounting for the multiple ways that tariffs might affect the manufacturing sector, including providing protection for domestic industries, raising costs for imported inputs, and harming competitiveness in overseas markets due to retaliatory tariffs. We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via rising input costs. * We are grateful to Vivi Gregorich for superb research assistance. We thank Ryan Monarch and participants at the 2018 Mid-Atlantic Trade Workshop at Duke for useful comments. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the Board of Governors or its research staff.

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Section: Introductionsupporting

confidence: 90%

Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector

Flaaen

Pierce

2019

FEDS

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“…But US exports also suer a loss of competitiveness on all markets (including the domestic one), as production costs increase in industries using taxed imported goods as inputs. Using micro level data, Handley, Kamal and Monarch (2019) show that the induced drop in US exports is equivalent to a 2% tari imposed on US exports. By the same token, restricting Chinese exports to the US market that contain previously exported US intermediate inputs also hurts the US value added.…”

Section: Introductionmentioning

confidence: 99%

Shooting Oneself in the Foot? Trade War and Global Value Chains

Bellora

Fontagné

2019

SSRN Journal

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By entering into a trade war, the US administration reached its goal to weaken the Chinese economy and protect certain industries, but this comes at a cost for the US economy itself, because GVCs are ubiquitous in most of the protected sectors. The increase in producer costs, caused by increased tariffs on goods for intermediate consumption, is detrimental to the competitiveness of US producers. This translates into losses of US market shares on export markets, adding to the toll of retaliation by China and other affected countries. Overall, US exports to the world post a sizeable decrease. Because of the tariffs in place as of February 2020, in our General Equilibrium setup, three quarters of the sectors decrease their value added in the US. Consistent with political economy determinants, these twists of value added are transmitted to production factors, leading to sizeable creation and destruction of jobs, and reallocation of capital to the benefit of protected sectors, mostly at the expense of their clients, i.e. downstream industries.

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“…Empirical work on the economic impact of the U.S.-China trade war is still at its infancy, but a slowly emerging body of work seems to indicate that the increased trade barriers in Chart 13 and the retaliation they triggered from China, has harmed both U.S. consumers (seeAmiti et al, 2019, Fajgelbaum et al, 2020 and also the U.S. manufacturing sector (see, Handley et al, 2020.…”

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confidence: 99%