Non-Tariff Barriers (NTBs) are the main policy impediment to international trade, yet little is known about their pass-through to prices. This paper exploits the Brexit trade policy shock to quantify how NTBs affect consumer prices and welfare. The increase in NTBs raised prices by 6%, implying a pass-through of 50-80%. Based on a standard welfare framework, we show households lost £5.84bn, domestic producers gained £4.78bn, and £1.06bn was lost through deadweight loss. Due to differences in food expenditure shares, households in the lowest decile experience a 52% higher increase in the cost of living than households in the top decile.

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Jan David Bakker, Nikhil Datta, Richard Davies and Josh De Lyon

1 December 2022     Paper Number CEPDP1888

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This CEP discussion paper is published under the centre's Trade programme.

This publication comes under the following theme: Brexit