Tariff Pass-through at the Dock and at the Store

Sat, 01 Oct 2022 22:55:34 +0000

In this paper, I study why U.S. tariffs during the U.S.-China trade war were passed through strongly to import prices at the dock but only weakly to consumer prices at the store. The project examines how pricing frictions and strategic interactions between producers and retailers shape the transmission of trade policy shocks across the supply chain. Open access here.

Built a multi-country model with retail sectors to study tariff pass-through at both the import and consumer price levels.
Modeled nominal frictions faced by upstream producers and downstream retailers to explain why tariffs affect prices differently across stages of the supply chain.
Introduced strategic pricing complementarities between vertically related firms, where tariff-induced increases in retail prices incentivize upstream producers to raise their own prices.
Showed that producer-retailer pricing interactions amplify tariff pass-through at the dock while limiting pass-through to final consumer prices.
Used the model to reconcile the observed pattern of high tariff pass-through into import prices and low pass-through into store-level prices during the U.S.-China trade war.
Contributed to the literature on trade policy, price rigidity, and international macroeconomics by showing how vertical pricing relationships shape the real effects of tariffs.

Quantitative Modeling on Jeremy Meng

Tariff Pass-through at the Dock and at the Store