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Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism

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Abstract

We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and they represent 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.

Suggested Citation

  • Kyle Handley & Fariha Kamal & Ryan Monarch, 2020. "Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism," International Finance Discussion Papers 1270, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1270
    DOI: 10.17016/IFDP.2020.1270
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    More about this item

    Keywords

    Global supply chains; Tariffs; Trade war; U.S. exports;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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