Trade Wars on the Income Statement: the Effects of Tariffs on Firms

Omar Barbiero, Viacheslav Sheremirov, Álvaro Silva and Hillary Stein

No 26-15, Working Papers from Federal Reserve Bank of Boston

Abstract: We construct firm-level exposure to the 2018 and 2025 US tariffs through own imports, suppliers' imports, and foreign retaliation, and estimate their joint effects using quarterly financial statements. Exposure is widespread and travels down supply chains, reaching firms that import little themselves. In 2025, cost exposure reduced sales and cost of goods sold equally within three quarters, by about 1.2 percent for the average direct importer and 0.5 percent through suppliers. Firms at least partly passed tariffs on to prices and shrank production rather than cutting margins. Retaliation instead compressed gross margins. The 2018 effects are small.

Keywords: trade war; supply chains; firm-level evidence; tariffs (search for similar items in EconPapers)
JEL-codes: F13 F14 F23 F41 F62 G38 (search for similar items in EconPapers)
Pages: 50
Date: 2026-10-01
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DOI: 10.29412/res.wp.2026.15

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