Did Foreigners Pay America’s Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through

Sharat Ganapati and Colin Hottman

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Transaction-level quantity discounts are a pervasive feature of US trade, shaping both price variation and tariff incidence. Using administrative microdata, we show that these discounts reflect transaction-level scale economies rather than market power. Accounting for these micro-level economies resolves a key puzzle: while observed import prices rose one-for-one with 2018-2019 US tariffs, we show this was driven by the loss of scale economies as transaction sizes collapsed. Controlling for this scale effect, the strategic pass-through of tariffs to scale-free prices falls to 60 percent, implying foreign exporters absorbed a significant share of the burden through reduced markups.

Date: 2026-02
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https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-17.pdf First version, 2026 (application/pdf)

Related works:
Working Paper: Did Foreigners Pay America’s Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through (2026)
Working Paper: Did Foreigners Pay America's Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:26-17

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