International Finance Discussion Papers (IFDP)

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February 2020

Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism

Kyle Handley, Fariha Kamal, and Ryan Monarch

Abstract:

We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidentia firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and they represent 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.

Keywords: Global supply chains; tariffs; trade war; U.S. exports

DOI: https://doi.org/10.17016/IFDP.2020.1270

PDF: Full Paper

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Last Update: February 14, 2020