What Determines State Heterogeneity in Response to US Tariff Changes?

Ana Maria Santacreu, Michael Sposi and Jing Zhang

No 2021-007, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We develop a structural framework to identify the sources of cross-state heterogeneity in response to US tariff changes. We quantify the effects of unilaterally increasing US tariffs by 25 percentage points across sectors. Welfare changes range from −0.8 percent in Oregon to 2.1 percent in Montana. States gain more when their sectoral comparative advantage covaries negatively with that of the aggregate US. Consequently, “preferred” changes in tariffs vary systematically across states, indicating the importance of transfers in aligning state preferences over trade policy. Foreign retaliation substantially reduces the gains across states while perpetuating the cross-state variation.

Keywords: interstate trade; gains from trade; customs union (search for similar items in EconPapers)
JEL-codes: F11 F62 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2021-05-21, Revised 2023-03-08
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: What Determines State Heterogeneity in Response to U.S. Tariff Changes (2023)
Working Paper: What Determines State Heterogeneity in Response to US Tariff Changes? (2023)
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DOI: 10.20955/wp.2021.007

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