01/07/2020

U.S. is Paying Bulk of Tariff Costs

Meanwhile, levies are failing to save steel jobs

American companies and consumers are paying almost the full cost of U.S. tariffs, and the impact of those duties on import volume magnifies over time, according to a paper circulated Monday by the National Bureau of Economic Research.

Traditional trade theory would suggest tariffs levied by the U.S. should cause foreign firms to lower prices and thereby force them to shoulder the cost of the duties. However, the study by Federal Reserve Bank of New York researcher Mary Amiti and professors Stephen Redding of Princeton and David Weinstein of Columbia shows the levies haven’t had a major impact on foreign export prices, suggesting American firms and consumers bear almost all the burden in most sectors as companies work to reorganize supply chains.

“Among goods that continue to be imported, a 10 [percent] tariff is associated with about a 10 [percent] drop in imports for the first three months, but this elasticity doubles in magnitude in subsequent months,” the authors wrote. That suggests “the 2018 tariffs — many of which were applied in October — are only now having their full impact on U.S. import volumes.”

Please select this link to read the complete article from BNN Bloomberg.