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The Impact of the 2018 Trade War on U.S. Prices and Welfare

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  • Redding, Stephen
  • Amiti, Mary
  • Weinstein, David

Abstract

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.

Suggested Citation

  • Redding, Stephen & Amiti, Mary & Weinstein, David, 2019. "The Impact of the 2018 Trade War on U.S. Prices and Welfare," CEPR Discussion Papers 13564, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13564
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    Keywords

    International trade; Tariffs; Trade war;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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