Working Paper

On the Distributional Effects of International Tariffs

Abstract: We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the U.S. and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth and labor skill. When tariff revenues are used to reduce labor and capital income taxes and increase transfers, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth and low-income workers, while only wealthy households experience a welfare gain.

Keywords: tariffs; inequality; consumption; welfare; taxation;

JEL Classification: E21; F10; F62; H21;

https://doi.org/10.24149/gwp413

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2022-01-29

Number: 413

Related Works

• Working Paper Revision (2023-03-29) : On the Distributional Effects of International Tariffs
• Working Paper Original (2022-01-29) : You are here.