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Working Paper
Tariff passthrough at the border and at the store: evidence from US trade policy
Cavallo, Alberto; Gopinath, Gita; Neiman, Brent; Tang, Jenny (2019-11-01)
We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy ? particularly the tariffs placed on imports from China ? on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to the total prices paid by importers, suggesting that the tariffs? incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese renminbi is unlikely to alter this conclusion. Next, ...
Working Papers , Paper 19-12

Discussion Paper
Who Pays the Tax on Imports from China?
Nattinger, Michael; Klitgaard, Thomas; Higgins, Matthew (2019-11-25)
Tariffs are a form of taxation. Indeed, before the 1920s, tariffs (or customs duties) were typically the largest source of funding for the U.S. government. Of little interest for decades, tariffs are again becoming relevant, given the substantial increase in the rates charged on imports from China. U.S. businesses and consumers are shielded from the higher tariffs to the extent that Chinese firms lower the dollar prices they charge. U.S. import price data, however, indicate that prices on goods from China have so far not fallen. As a result, U.S. wholesalers, retailers, manufacturers, and ...
Liberty Street Economics , Paper 20191125

Working Paper
International Trade of Essential Goods During a Pandemic
Santacreu, Ana Maria; Leibovici, Fernando (2020-05)
This paper studies the role of international trade of essential goods during a pandemic. We consider a multi-country, multi-sector model with essential and non-essential goods. Essential goods provide utility relative to a reference consumption level, and a pandemic consists of an increase in this reference level. Each country produces domestic varieties of both types of goods using capital and labor subject to sectoral adjustment costs, and all varieties are traded internationally subject to trade barriers. We study the role of international trade of essential goods in mitigating or ...
Working Papers , Paper 2020-010

Working Paper
International Trade of Essential Goods During a Pandemic
Santacreu, Ana Maria; Leibovici, Fernando (2020-05-05)
This paper studies the role of international trade of essential goods during a pandemic. We consider a multi-country multi-sector model with essential and non-essential goods. Essential goods provide utility relative to a reference consumption level, and a pandemic consists of an increase in this reference level. Each country produces domestic varieties of both types of goods using capital and labor subject to sectoral adjustment costs, and all varieties are traded internationally subject to trade barriers. We study the role of international trade of essential goods in mitigating or ...
Working Papers , Paper 2020-010

Report
Would protectionism defuse global imbalances and spur economic activity?: a scenario analysis
Laxton, Douglas; Pesenti, Paolo; Muir, Dirk; Faruqee, Hamid (2006)
In the evolving analysis of global imbalances, the possibility that countries will resort to increased protectionism is often mentioned but rarely analyzed. This paper attempts to fill that gap, examining the macroeconomic implications of a shift to protectionist policies through the lens of a dynamic general equilibrium model of the world economy that encompasses four regional blocs. Simulation exercises are carried out to assess the consequences of imposing uniform and discriminatory tariffs on trading partners as well as the consequences of tariff retaliation. We also discuss a scenario in ...
Staff Reports , Paper 268

Discussion Paper
Why Does the U.S. Always Run a Trade Deficit?
Klitgaard, Thomas (2025-05-20)
The obvious answer to the question of why the United States runs a trade deficit is that its export sales have not kept up with its demand for imports. A less obvious answer is that the imbalance reflects a macroeconomic phenomenon. Using national accounting, one can show deficits are also due to a persistent shortfall in domestic saving that requires funds from abroad to finance domestic investment spending. Reducing the trade imbalance therefore requires both more exports relative to imports and a narrowing of the gap between saving and investment spending.
Liberty Street Economics , Paper 20250520

Journal Article
Market Reactions to Tariff Announcements
Garimella, Rohit; Kwan, Simon H.; Mertens, Thomas M. (2025-10-06)
Financial markets repriced assets across a wide range of sectors following the U.S. trade policy announcement on April 2, 2025. Analysis suggests that market participants interpreted tariffs to have direct effects not only on companies in the sectors involved but also indirect effects on overall demand. Investors expected declines in corporate profits to be persistent both in the United States and abroad. The U.S. dollar depreciated against other safe-haven currencies, which points to investors reallocating their portfolios away from the United States and toward other markets.
FRBSF Economic Letter , Volume 2025 , Issue 23 , Pages 6

Journal Article
The Economic Implications of Tariff Increases
Ulate, Mauricio; Singh, Aayush; Poduri, Aditi; Paulson, Caroline M. (2025-07-14)
Trade policy in the United States has been in flux in recent months. A theoretical analysis of recent increases in U.S. tariffs, including potential retaliatory tariffs by other countries, suggests a resulting drop in overall U.S. employment, although manufacturing employment increases. Results also indicate a decline in overall real income for the United States of around 0.4%, although this number masks important variation across U.S. states.
FRBSF Economic Letter , Volume 2025 , Issue 16 , Pages 5

Working Paper
Tariffs and Goods-Market Search Frictions
Krolikowski, Pawel; McCallum, Andrew H. (2026-05-01)
We study tariffs in a general equilibrium dynamic model with search frictions between heterogeneous exporting producers and importing retailers. We show the model has a unique equilibrium and analytically characterize home unilateral import tariffs that maximize welfare given a passive foreign country. Search frictions add two terms to the standard optimal tariff expression: One lowers tariffs when contact rates are low; another when private export costs exceed social opportunity costs. Search frictions also introduce new incentives to subsidize imports due to market thickness effects. We ...
International Finance Discussion Papers , Paper 1437

Working Paper
The Surprisingly Swift Decline of U.S. Manufacturing Employment
Pierce, Justin R.; Schott, Peter K. (2014-01)
This paper finds a link between the sharp drop in U.S. manufacturing employment beginning in 2001 and a change in U.S. trade policy that eliminated potential tariff increases on Chinese imports. Industries where the threat of tariff hikes declines the most experience more severe employment losses along with larger increases in the value of imports from China and the number of firms engaged in China-U.S. trade. These results are robust to other potential explanations of the employment loss, and we show that the U.S. employment trends differ from those in the E.U., where there was no change in ...
Finance and Economics Discussion Series , Paper 2014-04

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