Who Pays for the Tariffs and Why? A Tale of Two Countries

Chaonan Feng, Liyan Han and Lei Li

No 10497, CESifo Working Paper Series from CESifo

Abstract: During the U.S.-China trade war, the U.S. punitive tariffs were almost entirely borne by U.S. importers. In contrast, only 68% of China’s retaliatory tariffs were paid by Chinese importers. The puzzling difference between the U.S. and China is mainly driven by their different import structures and product heterogeneity in tariff pass-through. China mainly imported products with lower tariff pass-through from the U.S., such as agricultural products and aircraft, while the U.S. primarily imported products with higher tariff pass-through from China, such as electronics. Furthermore, we decompose the product-level tariff pass-through and show that a higher ratio of import demand elasticity over export supply elasticity leads to lower tariff pass-through under perfect competition.

Keywords: trade war; tariff pass-through; import structure; product heterogeneity; demand elasticity; supply elasticity (search for similar items in EconPapers)
JEL-codes: F13 F14 F61 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cna and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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