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The impact of the 2018 trade war on U.S. prices and welfare

Redding, Stephen, Amiti, Mary and Weinstein, David (2019) The impact of the 2018 trade war on U.S. prices and welfare. CEP Discussion Papers (1603). Centre for Economic Performance, LSE, London, UK.

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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.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2019 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HC Economic History and Conditions
J Political Science > JZ International relations
JEL classification: F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
Date Deposited: 25 Nov 2019 15:36
Last Modified: 20 Jan 2020 00:44
URI: http://eprints.lse.ac.uk/id/eprint/102619

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