The Design and Effect of Tariff Retaliation: Evidence from the European Union

Ece Fisgin, Johannes Fleck and Keith Richards
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Johannes Fleck: https://www.federalreserve.gov/econres/johannes-fleck.htm

No 1436, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We show that the EU's 2018 retaliation against US steel and aluminum tariffs targeted goods with low US import dependence and high substitutability. For the majority of tariffed goods, the US share of EU imports declined notably and remained below pre-2018 levels even after the retaliatory tariffs were lifted, reflecting asymmetric effects of tariffs on trade diversion. Moreover, although the retaliatory tariffs were instantly and fully passed through to EU importers, the retaliation did not lead to domestic price pressures as we find no evidence for inflationary effects on consumer and producer prices.

Keywords: Trade policy; International trade; Prices (search for similar items in EconPapers)
JEL-codes: E31 F13 F14 F42 F62 (search for similar items in EconPapers)
Pages: 25 p.
Date: 2026-03-20
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:102987

DOI: 10.17016/IFDP.2026.1436

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