The Price Impact of Canadian Retaliatory Tariffs

Alberto Cavallo, Olena Kostyshyna, Oleksiy Kryvtsov and Matías Vieyra

Staff Working Papers from Bank of Canada

Abstract: How do import tariffs affect retail prices? We combine daily product-level posted prices from seven major Canadian retailers with product-level tariff exposure to estimate tariff effects in a difference-in-differences framework. Prices of tariffed goods rose gradually, peaking at 6% after three months, implying pass-through of roughly one quarter of the 25% tariff. We find little spillover to untariffed substitutes and a rapid reversal of price effects after tariff removal. Adjustment occurred mainly through the frequency of price changes. Pass-through shifted with trade-policy news and was larger for products labeled “Tariffed”, showing that tariff-induced inflation depends on policy expectations and tariff salience.

Keywords: Monetary policy; Inflation dynamics and pressures (search for similar items in EconPapers)
JEL-codes: E31 E52 F13 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2026-06
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:26-22

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