Department of Economics
University of California at Berkeley
Berkeley, CA 94720
Institutional Affiliation: University of California at Berkeley
NBER Working Papers and Publications
|March 2019||The Return to Protectionism|
with Pablo D. Fajgelbaum, Pinelopi K. Goldberg, Amit K. Khandelwal: w25638
We analyze the impacts of the 2018 trade war on the U.S. economy. We estimate import demand and export supply elasticities using changes in U.S. and retaliatory tariffs over time. Imports from targeted countries declined 31.5% within products, while targeted U.S. exports fell 11.0%. We find complete pass-through of U.S. tariffs to variety-level import prices. Using a general equilibrium framework that matches these elasticities, we compute the aggregate and regional impacts. Annual consumer and producer losses from higher costs of imports were $68.8 billion (0.37% of GDP). After accounting for higher tariff revenue and gains to domestic producers from higher prices, the aggregate welfare loss was $7.8 billion (0.04% of GDP). U.S. tariffs favored sectors located in politically competitive c...