Pass-Through Beyond the Border:  Oligopoly, Networks, and Tariffs

RePEc Short ID: pba1895
ORCID iD: 0000-0002-1513-3805

Barbiero, Omar; Silva, Alvaro; Stein, Hillary

doi:10.29412/res.wp.2026.14

Working Paper

Pass-Through Beyond the Border: Oligopoly, Networks, and Tariffs

Abstract: We develop a multisector open-economy model that maps border price shocks into US producer and consumer prices through imported inputs, domestic production networks, and competition with foreign suppliers. The framework, which we apply to the 2025 US tariffs, accommodates pass-through in either levels or logs and maps directly to public data on input–output linkages, trade, and prices. Allowing firms to respond to the prices of competing imported varieties substantially improves the model’s fit to producer prices, and the resulting model is also consistent with the consumer-price response. Aggregating the estimated price effects across the full consumption basket, the February–October 2025 tariff increases imply a first-order contribution of 0.91 percentage points to headline PCE inflation, including 0.10 percentage points from the foreign competition channel.

JEL Classification: E31; E65; F40;

https://doi.org/10.29412/res.wp.2026.14