A Quantitative Analysis of Tariffs Across U.S. States

Ana Maria Santacreu, Michael Sposi and Jing Zhang

No WP-2021-08, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We develop a quantitative framework to assess the cross-state implications of a U.S. trade policy change: a unilateral increase in the import tariff from 2% to 25% across all goods-producing sectors. Although the U.S. gains overall from the tariff increase, we find the impact differs starkly across locations. Changes in real consumption (welfare) range from as high as 3.8% in Wyoming to –0:3% in Florida, depending mainly on how exposed states are to differentially-impacted sectors. As a result, the "preferred" tariff rate varies greatly across states. Foreign retaliation in trade policy substantially reduces the welfare gains across states, while perpetuating the cross-state variation in those gains. The presence of internal trade frictions amplifies the welfare impacts of changes in trade policy.

Keywords: International trade; Interstate trade; Welfare gains from trade (search for similar items in EconPapers)
JEL-codes: F11 F62 (search for similar items in EconPapers)
Pages: 46
Date: 2021-05-21
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: A Quantitative Analysis of Tariffs across U.S. States (2021)
Working Paper: A Quantitative Analysis of Tariffs across U.S. States (2019)
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DOI: 10.21033/wp-2021-08

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