Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy

Abstract

We use microdata collected at the border and the store to characterize the price impact of recent US 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, US exporters significantly lowered prices affected by foreign retaliatory tariffs. In US 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 US firms. (JEL E31, F13, F14, F31, L11)

Self-Harming Trade Policy? Protectionism and Production Networks

“…Figure A.8 shows the e¤ect of TTBs on unit values is not statistically signi…cantly di¤erent from zero. This …nding is consistent with recent evidence that documents full tari¤ pass-through (Cavallo, Gopinath, Neiman, and Tang, 2021). However, we warrant caution in interpreting the evidence in…”

“…21 Their average openness-measured by their imports over output-is approximately 35%. Thus, assuming complete tari¤ pass-through (Cavallo, Gopinath, Neiman, and Tang, 2021), the uniform upstream tari¤ raises the average downstream input price by approximately 0:1% other things equal. 22 This …gure lies within the 90-percent con…dence interval of the average input price response at all horizons.…”

US Trade Policy and the US Dollar

“…In addition, our findings suggest that the average exchange rate pass-through over all goods imported from China to the USA is sizable (≈ 60% in our baseline regression), whereas we find that exchange rate pass-through for imports to the USA from the rest of the world (excluding China) is much lower. The latter is in line with evidence in Cavallo, Gopinath, Neiman, and Tang (2021), which indicates that in the USA the exchange rate pass-through to import prices across all trading partners is on average small. A plausible explanation for this difference is again the higher reliance of Chinese producers on Chinese inputs.…”

“…Notably, Cavallo et al (2021) find a low average US exchange rate pass-through to import prices of around 20-30% across all trading partners (depending on the empirical specification). When we estimate equation (1) for US imports from the rest of the world (without China), we also obtain a relatively low pass-through of around 40 % (see Table 3).…”

“…To analyze this relationship at the level of product categories, we start by estimating relatively standard exchange rate pass-through regressions (cf. Burstein and Gopinath, 2014) encompassing import tariffs (similar to Cavallo et al, 2021). More precisely, we run the following regression with monthly data at an HS-6 product level for the period January 2003 to December 2019 6…”