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We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy - particularly the tariffs placed on imports from China - on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting the tariffs' incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese renminbi is unlikely to alter this conclusion. Next, using product-level data from several large multi-national retailers, we demonstrate that the impact of the tariffs on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers' imports increased after the initial announcement of possible tariffs, but before their full implementation, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.
We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy - particularly the tariffs placed on imports from China - on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting the tariffs' incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese renminbi is unlikely to alter this conclusion. Next, using product-level data from several large multi-national retailers, we demonstrate that the impact of the tariffs on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers' imports increased after the initial announcement of possible tariffs, but before their full implementation, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Trade flows and trade policies need to be properly quantified to describe, compare, or follow the evolution of policies between sectors or countries or over time. This is essential to ensure that policy choices are made with an appropriate knowledge of the real conditions. This practical guide introduces the main techniques of trade and trade policy data analysis. It shows how to develop the main indexes used to analyze trade flows, tariff structures, and non-tariff measures. It presents the databases needed to construct these indexes as well as the challenges faced in collecting and processing these data, such as measurement errors or aggregation bias. Written by experts with practical experience in the field, A Practical Guide to Trade Policy Analysis has been developed to contribute to enhance developing countries' capacity to analyze and implement trade policy. It offers a hands-on introduction on how to estimate the distributional effects of trade policies on welfare, in particular on inequality and poverty. The guide is aimed at government experts engaged in trade negotiations, as well as students and researchers involved in trade-related study or research. An accompanying DVD contains data sets and program command files required for the exercises. Copublished by the WTO and the United Nations Conference on Trade and Development
Border clearance processes by customs and other agencies are among the most important and problematic links in the global supply chain. Delays and costs at the border undermine a country’s competitiveness, either by taxing imported inputs with deadweight inefficiencies or by adding costs and reducing the competitiveness of exports. This book provides a practical guide to assist policy makers, administrators, and border management professionals with information and advice on how to improve border management systems, procedures, and institutions.
We estimate the macroeconomic effects of import tariffs and trade policy uncertainty in the United States, combining theory-consistent and narrative sign restrictions in Bayesian SVARs. We find mostly adverse consequences of protectionism, in aggregate and across sectors and regions. Tariff shocks are more important than trade policy uncertainty shocks. Tariff shocks depress trade, investment, and output persistently. The general equilibrium import elasticity is –0.8. Historically, NAFTA/WTO raised output by 1-3% for twenty years. Undoing the 2018/19 measures would raise output by 4% over three years. The findings imply higher gains of trade than partial equilibrium or static trade models.
An accessible overview of political, economic, and strategic dimensions of global supply chains in a changing global political economy.
Global Tariff War: Economic, Political and Social Implications traces the impacts that global tariff wars in international trade can have on the growth of national economies. Offering a range of perspectives from developing economies, this collection presents a unique insight into this complex area of geo-political and economic practice.
Trade costs and inclusive growth looks at how implementation of the WTO's Trade Facilitation Agreement (TFA) can help to reduce trade costs and promote growth. The publication rings together contributions from ten participants in the WTO Chairs Programme, which supports trade-related activities by academic institutions in developing countries. The book looks into how the Aid for Trade initiative can assist with implementing the TFA, the importance of mainstreaming trade into national development strategies, and the potential impact of the TFA in various regions.