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Abstract:

cover
CEP Discussion Paper
The Impact of the 2018 Trade War on U.S. Prices and Welfare
Mary Amiti, Stephen J. Redding and David Weinstein
March 2019
Paper No' CEPDP1603:
Full Paper (pdf)

JEL Classification: F13; F14


Tags: international trade; tariffs; trade war

This paper explores the impacts of the Trump administration’s trade policy on prices and welfare. Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. We also see similar patterns for foreign countries who have retaliated against the U.S., which indicates that the trade war also reduced real income for other countries.