Minnesota’s Economic News — W/E 9/24/21
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A recent NBER working paper has shown that American consumers continue to bear the costs of tariffs placed on Chinese goods. Contrary to the expectation of lower foreign prices, recent US tariffs have been passed on to importers and consumers almost entirely.
Using data from 2018, previous studies have found that tariffs have been passed on entirely to U.S importers and consumers. Researchers (Mary Amiti, Stephen Redding and David Weinstein) use data from 2019 to observe any change in current trends in trade.
In this paper, we…find that adding data for most of 2019 does not alter the main conclusions of earlier studies. U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers.
And even though tariffs have not had a substantial impact on prices, they are having sizable impacts on U.S import volumes. Specifically, imports have continued to fall and in higher magnitudes compared to when the tariffs were first introduced, showing delayed impact. This suggests that some firms take time to reorganize their supply chains so as to avoid imposed tariffs.
For the steel industry, however, the effects are a little different. Tariffs have caused a reduction in foreign steel prices, but foreign countries are bearing only close to half the cost of these tariffs. Additionally these costs mostly fall on the European Union, Japan and South Korea, since China is only the 10th largest supplier of steel to the US.
The drop in foreign prices in steel has additionally enabled foreign exporters to export more than in other sectors where tariffs were completely passed on to customers. This suggests steel tariffs have a much smaller capacity to protect workers than those on other goods.