Did Foreigners Pay America's Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through

Sharat Ganapati and Colin Hottman

No 34901, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Transaction-level quantity discounts are a pervasive feature of US trade, shaping both price variation and tariff incidence. Using administrative microdata, we show that these discounts reflect transaction-level scale economies rather than market power. Accounting for these micro-level economies resolves a key puzzle: while observed import prices rose one-for-one with 2018-2019 US tariffs, we show this was driven by the loss of scale economies as transaction sizes collapsed. Controlling for this scale effect, the strategic pass-through of tariffs to scale-free prices falls to 60 percent, implying foreign exporters absorbed a significant share of the burden through reduced markups.

JEL-codes: F10 F12 F14 (search for similar items in EconPapers)
Date: 2026-02
Note: ITI
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Working Paper: Did Foreigners Pay America’s Tariffs? Quantity Discounts, Scale Economies and Incomplete Pass-Through (2026)
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