To what extent are tariffs offset by exchange rates?

Olivier Jeanne and Jeongwon Son

Journal of International Money and Finance, 2024, vol. 142, issue C

Abstract: In theory, tariffs should be partially offset by a currency appreciation in the tariff-imposing country or by a depreciation in the country on which the tariff is imposed. We find, based on a calibrated model, that the tariffs imposed in the 2018-19 US-China tariff war should not have had a large impact on the dollar but may have significantly depreciated the renminbi. This prediction is consistent with a high-frequency event analysis looking at the impact of tariff-related news on the dollar and the renminbi. We find that tariff news explained at most one fifth of the dollar effective appreciation but around two thirds of the renminbi effective depreciation observed in 2018-19.

Keywords: Exchange rates; Tariffs; Dollar; Renminbi (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000020

DOI: 10.1016/j.jimonfin.2024.103015

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