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Do Import Tariffs Protect U.S. Firms?

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Abstract

One key motivation for imposing tariffs on imported goods is to protect U.S. firms from foreign competition. By taxing imports, domestic prices become relatively cheaper, and Americans switch expenditure from foreign goods to domestic goods, thereby expanding the domestic industry. In a recent Liberty Street Economics post, we highlighted that our recent study found large aggregate losses to the U.S. from the U.S.-China trade war. Here, we delve into the cross-sectional patterns in search of segments of the economy that may have benefited from import protection. What we find, instead, is that most firms suffered large valuation losses on tariff-announcement days. We also document that these financial losses translated into future reductions in profits, employment, sales, and labor productivity.

Suggested Citation

  • Mary Amiti & Matthieu Gomez & Sang Hoon Kong & David E. Weinstein, 2024. "Do Import Tariffs Protect U.S. Firms?," Liberty Street Economics 20241205, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:99237
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    More about this item

    Keywords

    trade war; Import tariff; stock returns;
    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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